We may be on the verge of spring, but housing and economic reports work on a bit of a lag time. We’ve only just gotten the major data reports for January and February, and it’s giving us a clear-eyed view of how the real estate market is measuring up this year.
And yeah, things are looking good.
Job creation—arguably the most important factor in housing demand—is moving apace. January saw 151,000 jobs created. That level of employment growth is below 2015’s monthly average, but unemployment is now near 10-year lows and is in line with the current macro forecast from the National Association of Realtors® (NAR). This level of employment growth should translate into the 3% growth in housing sales we are expecting for the year.
Speaking of sales, January and February’s existing home sales reports did not disappoint. Even though sales are taking longer to close, due to the implementation of new disclosure and closing forms and procedures, the pace grew 47.1% in January from December, and 6% in February from January!
The increase in sales is resulting in continued tighter-than-tight supply—measured by NAR to be four months in February, while here in central Ohio that number drops to barely over two months! For you non-economists out there, that metric measures the number of months it would take to sell the current inventory of available homes, at the current pace. Got it? Six to seven months’ worth of homes on the market is considered normal and a balanced market; two months signals a strong seller’s market.
This is driving prices higher and encouraging consumers who hope to buy this year to get started as soon as possible.
January’s new home sales and new home construction remained consistent with the pace of activity of the last several months. Still, the level of new construction represents solid year-over-year growth, especially in single-family homes. The most encouraging sign: The median price of new homes is finally declining, as a result of the fact that builders are offering more affordable homes.
Finally, the most timely readings we can pass on come from our own market observations which confirm that demand is growing rapidly at the start of the year, resulting in an acceleration in inventory movement that we typically do not see until March or April.
OK, not everything is rainbows and unicorns. The biggest negative trend impacting potential demand relates to the January and February declines in stock values, which have taken a toll on consumer confidence and impacted the impacted demand at the upper end of the market. But, even that negative trend has a silver lining as stock prices have turned been up sharply in March yet mortgage rates are now substantially lower. The average 30-year conforming rate has stabilized at under 3.7%, giving buyers almost 5% more buying power than they had at the end of 2015, and strengthening their ability to meet the debt-to-income ratio requirement for a loan.
Net-net, pent-up demand appears stronger than any weakness initially caused by the financial markets. And the lower rates are encouraging would-be buyers to act sooner rather than later. With this strong start, 2016 should indeed see growth, but the biggest constraint will be the tight supply.
If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 Marysville 43040 43041 New Albany 43054 Pickerington 43147 Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235