It’s official, The National Association of Realtors has announced it is now a Sellers Market. Given the dwindling supply of good quality homes in prime locations buyers are finding it hard to locate a home to purchase whether it’s a new home, existing home, short sale or foreclosure. Nationally the number of homes listed for sale in January was at 1.74 million which is a drop of 4.7%. That is a thirteen year low and it leaves the available supply at the current sales pace to only 4.2 months. Considering what it used to be, that is a substantial reduction.
The net result of all this market change is market prices are on the increase. For new construction prices will rise as labor and material costs increase. A large portion of the New Construction labor base is gone and manufacturing capacity of materials used in new construction has diminished as well.
As the market price of existing homes increases more people who are currently underwater on the present home will be righted allowing them to sell what they own and purchase something else. More importantly, those who were not underwater but were unwilling to sell at the record low prices may finally be willing to put their homes on the market as the prices rise.
An additional factor in this rising demand is household formation which has been held back over the past several years. Basic demographics also point to increased demand and affordability measures like Mortgage Rates contribute to the bullish viewpoint. Goldman Sachs currently forecasts 5.2 million homes sold in 2013 which would be a 12% increase.
This is all good news for the housing industry and the markets as a whole. Historically housing has been crucial in leading the US out of the financial doldrums. Getting the housing market back on its feet is a first step in true economic improvement for everyone.