Tight Inventories Propel Prices

Supplies of listed homes in REMAX’s database lit a fuse under January prices, sending pricing soaring 11.2 percent over a year ago.  Inventories were down 10.2 percent and months’ supply fell to 5.2, pushing the 6.0 boundary where markets are out of balance.

The dramatic drop in listings tracked by REMAX echoed findings by NAR, Realtor.com and Zillow that supplies are tighter than they were last year and even two years ago when lack of supply sparked double digit prices increases and bubbles in several California markets (See Winter Inventories Plant Seeds for Spring Surprises).

Sales were also down dramatically from December. In the 53 metro areas surveyed for the January RE/MAX National Housing Report, the number of home sales decreased 32.1 percent from a robust December and were 3.9 percent below sales in January 2014. Typically, January closings are lower than those in December, and since 2008 the RE/MAX National Report has recorded an average 26.9 percent drop from December to January. Also likely impacting January’s lower closings is a continuing tight inventory and increasing prices. This January, a total of 13 metro areas reported higher sales on a year-over-year basis,

For all homes sold in January the Median Sales Price was $189,000. This was 3.3 percent lower than the median price in December, but 11.2 percent above the median price seen in January 2014. On a year-over-year basis, the Median Sales Price has now risen for 36 consecutive months. Price appreciation is the result of pressure from year-over-year inventory losses. Inventory has dropped by roughly 10 percent for the last three months. Among the 53 metro areas surveyed, 48 reported higher sales prices than one year ago

The average Days on Market for all homes sold in January was 80, six days higher than the average in both December and January last year. Days on Market has been below 80 since March 2013, when the average was 85. An increase in Days on Market could be the result of higher quality inventory and a corresponding higher sales price. Days on Market is the number of days between when a home is first listed in an MLS and when a sales contract is signed.