State of the Market

With Spring right around the corner (really!), many are starting to feel house bound. Those thinking of moving have reason to wonder what kind of market they are stepping into.

Today’s release from the National Association of Realtors provides a timely view into the state of the market.

The biggest take-away is that there seems to be pent up demand nationally, with sales limited by the low level of available houses in the market

More rapid economic growth and high levels of consumer confidence has brought out the buyers. Many who have been putting off moving are stepping into the market. While the percent of first time buyers is down a bit to 32% of buyers, repeat buyers are deciding to move after being in the same property for 10 years on average. That 10 year number matches the residency term for the last few years, but is the highest recorded. The repeat buyers are also older on average at 52 than they have been in the past, which follows naturally from the longer term of ownership and is a strong comment on the confidence of this contingent on their expected economic prospects. If economic growth continues to shine, we can expect more confident buyers to turn over their properties and move up-market, which will shorten the average holding period.

First time buyers are being constrained by a number of factors, including relatively high student debt and the lack of affordable properties in many markets. Their debt levels are limiting their access to mortgages at a time when cash buyers and those with pre-approval have the upper hand in bidding for houses, given that many properties are receiving multiple offers and are selling at or above the asking price.

First time and repeat buyers are overwhelmingly buying single family houses in the suburbs. While this is not the stereotypical behavior we are led to expect of the Millenials, it is the case that home buyers look to better school districts and less densely populated areas as they start families and putting down roots.

The rate of new home construction has been too low to satisfy the demand of return buyers in the market. This has put the first time buyers in competition with return buyers for resales, raising costs and dampening sales to first time buyers.

My main take-away from this update on market conditions is that there is a demand for quality affordable housing. The Philadelphia area has an older housing stock, much of which has not been modernized. First time and repeat buyers should look to rehabbed houses in stable neighborhoods for the supply not being built quickly enough to satisfy the demand for quality homes.