Housing Market on the Sunny Side This Summer
By Susanna Kim | September 13, 2016
Summer is normally a popular time to buy or sell a home. But this season’s strong housing and economic data may make it the “best summer for the housing market in a decade,” declares Jonathan Smoke, chief economist at Realtor.com, in a piece he penned for CNBC.com.
Smoke says the employment report affirmed healthy economic fundamentals that support demand for housing. He also points to consumer confidence as a factor that favors those who want to buy a home.
Although data points for August are yet to come, Smoke says he believes the demand for real estate remained robust.
Sunny Days Ahead
Sarah Parada’s family is one of those contributing to positive news for August home sales. After renting an apartment in the suburbs of Washington, DC, her family closed on a new home in late August.
It was a priority to stay in the same school district where her two children are students. But because properties in her area move fast, she realized they would have to move fast to close a deal too.
When they found a home they liked, they submitted an offer the next day. By day two, they had the home under contract. Within a month, they moved in. “The market around here is so expensive that if you like something, and it’s a decent house, you need to jump on it,” says Parada.
“And if we didn’t find anything we liked, we probably would have stayed in the same rental for another year,” she says.
While the real estate market may have sizzled this summer, two key factors continue to hold back the number of transactions: limited supply and tight credit, Smoke says.
“Those factors are most significant in hot, but high-cost markets like San Francisco, where we are seeing some cooling in demand. But even with some cooling, markets like San Francisco remain very hot relative to the rest of the U.S.,” Smoke says.
Affordable markets – especially in the Midwest and Southeast – likely saw sales remain strong through August, he says. Late summer conditions have profited from frustrated shoppers, who have been unable to find a home, staying in the market as mortgage rates linger near all-time lows.
Doug Duncan, chief economist at Fannie Mae, says in terms of home sales and construction, “There’s no doubt that if you look at the depth of the crisis, we’ve been on an uptrend.”
From an eight-year high in June, new single-family home sales climbed 12.4 percent in July to a seasonally adjusted rate of 654,000, according to the Commerce Department.
On Aug. 16, the Commerce Department reported housing starts increased 2.1 percent in July to a seasonally adjusted rate of 1.2 million units, the highest level since February.
Still, the limited supply of homes for sale is a major challenge, Duncan says. The supply of unsold existing-home inventory was 4.7 months in July, according to the National Association of Realtors®. A “normal” supply typically runs between six and seven months, he says.
"We’re not back to normal by any means," Duncan says about the housing market. "The limited supply of starter homes means house prices are appreciating well above the long-term inflation-adjusted pace and thus a headwind for first-time buyers."
Estimates, forecasts, and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions, and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) Group guarantees that the information in this article is accurate, current, or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR Group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.