The 3rd quarter of 2016 continues to be an extension of the previous quarters of 2016 with home prices continuing to rise, homes selling fast, and a very tight inventory of homes for sale. The most notable change in the 3rd quarter was a significant decrease in both buyer and seller activity occurring during the quarter. Our survey showed that buyer activity was down in 13% and seller activity down in 12% of the markets surveyed compared to the 2nd quarter. Additionally, buyer activity was down 6% and seller activity was up 4% compared to the same time last year. Home prices continue to rise and according to the latest National Association of Realtors (NAR) report, home prices have increased 5.6% over this time last year. NAR states that prices have increased for 55 consecutive months of year over year gains. Tight supply of homes available for sale and record low interest rates are largely responsible for the steady rise of home prices.
The data in this report comes primarily from a survey of HouseHunt real estate agents with “exclusive territories” across the United States. The grass roots approach to studying the housing market gives us a thorough look at where the real estate market is at the end of each quarter through the perspective of the local agents who are working in the trenches in each community.
Buyer and Seller Activity
The trend in both buyer and seller activity is down for the 3rd quarter compared to the trend in the second quarter. Buyer activity is increasing in 66% of the markets surveyed and decreasing in 16% of the markets surveyed compared to the 2nd quarter when buyer activity was increasing in 84% of the markets surveyed and decreasing in only 3% of the markets surveyed. This represents a significant slowing of buyer activity. Simultaneously the trend for seller activity is also down in the 3rd quarter by 18%. In the 3rd quarter 40% of the markets surveyed showed an increase in seller activity compared to 58% of the markets showing an increase in seller activity in the 2nd quarter. Additionally, another 22% of the markets showed a decreasing trend in seller activity compared to only 10% in the second quarter. Clearly there was a marked slowing of both buyer and seller activity during the 3rd quarter.
While the majority of markets are still struggling with more buyers wanting to purchase homes than sellers wanting to sell their homes; the ratios are beginning to become more balanced. This quarter we have 54% of our markets stating they have more buyers than sellers compared to 63% last quarter a healthy decline of 9%. Plus, 27% of the markets now have more sellers than buyers a healthy increase of 8% over last quarter. The more the ratios trend toward an equal balance is good for the real estate market. A balance of buyers and sellers allows potential home purchasers to look at multiple homes and affords buyers more time to make a good decision rather than snapping up the first home that comes onto the market. Another indication of activity decline is the reduction in multiple offers on homes for sale. In the 3rd quarter 78% of the markets reported commonly receiving multiple offers compared to 90% in the second quarter, a decline of 12%.
Home inventories continue to be very tight with our survey showing that 70% of the markets are reporting tight to very tight inventory compared to 66% last quarter. Only 30% of the markets are showing a good supply of homes. Average days on the market has also declined with 64% of the markets are selling in under 60 days compared to 53% last quarter. Conversely, 36% of the markets show homes selling in excess of 60 days. That is an increase of 11% over last quarter.
Homeowners are receiving over 95% of asking price in 83% of the markets surveyed which is an increase from 78% in the 2nd quarter. Clearly, sellers are still in control of the market and expect to get close to asking price on their homes.
During the 3rd quarter the average time on the market trend was increasing. The length of time a home took to sell was increasing in 27% of the markets surveyed compared to only 15% of the markets in the 2nd quarter. The length of time to sell a home is decreasing in 56% of the markets compared to 63% in the last quarter.
Home foreclosures continue to remain at below normal levels with 95% of our Agents stated that foreclosures made up less than 15% of the inventory. This is consistent with NAR’s report that distressed sales fell to a new low of 4% of all sales. Foreclosures and distressed properties are not having a major impact in the real estate markets.
Many of the factors that have been prevalent in the housing market for the last few years are still in play, including low inventory levels, more buyers than sellers, and record low interest rates.
According to NAR there is a 4.5 month supply of homes for sale which indicates a seller’s market compared to a balanced market which is considered to be a 6 month supply of homes for sale. Low interest rates are still fueling buyer activity and keeping monthly payments on rising home prices affordable.
Even though there has been a decline in buyer and seller activity this quarter; yearly sales are on pace for around 5.5 million homes selling in 2016 compared to 5.4 million homes sold in 2015. There is a steady home appreciation rate of approximately 5.6%. This market continues to be a solid market for both buyers and sellers and should continue into the foreseeable future.