RE/MAX: Low Inventories + Stronger Sales = Higher Prices

Low inventories combined with higher sales in February resulted in a year over year price increase of 5.5 percent, according to the February RE/MAX National Housing Report.

Unlike last February, this February experienced increased home sales, but with only a moderate rise in prices. Home sales in February rose 7.1% from January and 2.2% from February 2014. Sales through the fall and winter months held ground, as four of the last six months saw higher sales than the same month in the previous year. The Median Sales Price in February rose 5.5% compared with a year-over-year increase of 11.6% in February 2014. The inventory of homes for sale was 11.9% lower than one year ago. At the current rate of sales, the corresponding months’ supply of inventory fell to 4.7 on a scale where 6.0 indicates a market balanced equally between buyers and sellers.

In the 53 metro areas surveyed for the February RE/MAX, the average number of home sales increased 2.2% over sales in February 2014 and were 7.1% higher than January sales. In the seven-year history of the RE/MAX Housing Report, monthly sales growth averaged only 4.8%. Despite a tight inventory and rising prices, many homebuyers decided to move forward with a purchase. This February, 34 of the 53 metro areas surveyed reported higher sales

For all homes sold in February, the Median Sales Price was $189,750. This was 0.4% higher than the median price in January, and 5.5% above the median price seen in February 2014. On a year-over-year basis, the Median Sales Price has now risen for 37 consecutive months. Continuing price appreciation is the result of pressure from a constrained inventory, which has been an average of 10% lower than the same time last year over the last four months. Among the 53 metro areas surveyed, 48 reported higher sales prices than one year ago, with 14 rising by double-digit percentages.

The average Days on Market for all homes sold in February was 80, unchanged from January and just one day higher than the average in February 2014. Other than January and February, Days on Market has been below 80 since March 2013, when the average was 85. Higher Days on Market averages could be the result of higher quality inventory and corresponding higher sales prices. Days on Market is the number of days between when a home is first listed in an MLS and a sales contract is signed.

The inventory of homes for sale in February was lower than both the previous month and the same month last year. Inventory was down 11.9% from February 2014 and was 3.2% lower than January’s inventory. For the last two months, sequential inventory losses have slowed down. Based on February’s rate of home sales, the average months supply of Inventory was 4.7. Months’ supply was 5.2 in January and in February 2014. A supply of 6.0 is considered balanced. Months’ supply was very low in San Francisco, CA (1.1 months); Denver, CO (1.1); Seattle, WA (1.7); San Diego, CA 1.9; Dallas-Ft. Worth, TX (2.2) and Portland, OR (2.2).