The story has been the same for a while — high buyer demand plus a short supply of homes for sale equals higher home prices and plenty of buyer frustration.
It may be the strongest seller’s market ever, but buyer frustration is now taking its toll. Some would-be shoppers are even choosing to sit the spring market out.
Demand from homebuyers fell 14 percent in March from February, according to Redfin, a national real estate brokerage. Redfin measures demand by looking at the number of customers requesting home tours and writing offers.
Demand had hit a record in January, as consumers felt better about the economy and anticipated a strong spring market. They clearly did not anticipate how few homes they’d find for sale.
Compared with February, the seasonally adjusted number of buyers requesting tours fell 5.5 percent in March, and the number of buyers writing offers dropped nearly 23 percent.
It’s not that Americans don’t want to buy homes, it’s that there are just too few homes for sale. Across the 15 metros covered by Redfin’s index, there were 12.5 percent fewer homes for sale than in March 2016. Inventory has now been falling annually for 22-straight months.
“The market is missing its moment because of too-low inventory,” said Redfin chief economist Nela Richardson. “Low unemployment rates and high consumer confidence should create continued momentum in homebuyer demand. But, instead, we’re seeing demand cooling when it should be peaking.”
The drop in demand is also showing up in mortgage applications to purchase a home, perhaps the most current indicator of housing demand. These applications are less than 1 percent higher than they were a year ago. At the same time last year, mortgage purchase applications were up around 17 percent annually.
At a recent Sunday open house in Burbank, California, buyer frustration permeated the event.
“I’m a little nervous about it. I’m intimidated,” said Lena Araradie, a renter who said all of the homes in desirable areas were going quickly and far above asking price. She is looking at homes about $40,000 under her budget because she knows she will likely get in a bidding war.
Fellow shopper Jilbert Mosessian has already lost out on three different properties.
“We’re pretty much walking away from our prime neighborhood where we’ve been for awhile as a renter, so [we’re] considering other areas and also cutting from our expectations,” Mosessian said.
So far, even the jump in new spring listings is not helping the supply situation. What comes on the market goes very quickly.
“For this reason, we think the 2017 market will be a late bloomer, with new listings coming on later in the year and sales peaking in the early fall, instead of summer,” said Redfin’s Richardson.