The 4th quarter of 2016 continues to reflect on what turned out to be the best year in the housing market since 2006.
Even with a slight turn down in activity in December 2016 home prices continue to rise, home are selling fast, and inventory is very tight. The most notable change in the 4th quarter was a significant increase in markets where more buyers than sellers were vying for a limited supply of homes. Our survey showed that in 58% of the markets surveyed there were more buyers than sellers and increase of 4% over the 3rd quarter and an increase of 10% over the 4th quarter of 2015. Additionally, 70% of our markets survey showed a tight supply of homes, an increase of 3% over last year. Also, home prices increased in 86% of the markets surveyed nationwide.
Even with the slowing in activity in December, according the National association of Realtors (NAR) 2016 was the best year in the housing market since 2006 with 5.45 million units sold compared to5.25 million sale in 2015. Median home prices also increased 4% from 2015. The median home price in 2015 was $223,200 compared to $232,200 in 2016.
The data in this report is generated primarily from our survey of HouseHunt.com real estate agents with “exclusive territories” across the United States. This 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 living and working in the trenches of each community.
Buyer and Seller Activity
The trend in both buyer and seller activity is up slightly in the 4th quarter compared to the 3rd quarter. Buyer activity increased in 66% of the markets surveyed and decreased in 15% of the markets surveyed indicating no relevant change since the 3rd quarter and only a slight increase of 2% since the 4th quarter of 2015. Simultaneously the trend for seller activity continued to increase in the 4th quarter with 42% of the markets indicating increased seller activity compared to 40% of the markets in the 3rd quarter and 35% of the markets this time last year. Overall that represents a healthy increase in seller activity of 7% over 2016.
The majority of markets are still struggling with more buyers wanting to purchase homes than sellers wanting to sell their homes. This quarter we have 58% of our markets stating they have more buyers than sellers compared to 54% last quarter and 48% in the 4th quarter of 2015. As a result, the average time on the market has decreased in 56% of the markets surveyed, representing an increase of 20% over the 4th quarter of 2015. According to NAR, the inventory of homes for sale at the end of 2016 is at historic lows with only a 3.6 month supply homes for sale nationwide. A balanced “normal market is a six month supply of homes available for sale.
Home inventories continue to be very tight with our survey showing that 70% of the markets are reporting tight to very tight inventory which is the same as last quarter. Only 30% of the markets are showing a good supply of homes. Average days on the market has also declined. In 59% of the markets surveyed, homes are selling in under 60 days compared to 64% in the 3rd quarter. Conversely there are 41% of the markets showing homes selling in excess of 60 days an increase of 6% over last quarter.
Homeowners are receiving over 95% of asking price in 72% of the markets surveyed; which is a decrease from 83% in the 4th quarter. This reflects the soft December and probably will not extend into 2017 as there are record low inventory levels going into next year.
Home foreclosures continue to remain at normal levels with 95% of our real estate agents reporting that foreclosures made up less than 15% of the inventory in their community. This is consistent with NAR’s report that distressed sales fell to a new low of 5% 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 Freddie Mac, December interest rates on a 30 year mortgage increased to 4.20% from 3.77% in November. This may well result in a smaller buyer pool going forward with a negative effect on first time home buyers in 2017.
According to NAR there is a 3.6 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.
2016 has been a great year for the housing market with 5.45 million housing units sold the highest number since 2006 and an increase of the median home price of 4%. 2017 should remain robust but rising interest rates and lack of inventory are potential headwinds unless jobs and wage increases can offset the higher cost of housing in 2017.
(HouseHunt, Inc. is a consumer-oriented Internet firm that provides free information and services to homeowners, home buyers and home sellers in 48 states through its member agents and through its primary website, HouseHunt.com.)
HouseHunt’s Quarterly Comparison Chart For the U.S. | 4th Quarter 2016 Results in Red