October 27th, 2014
As autumn begins and winter approaches, fewer homeowners put their properties on the market in anticipation of the slower buying season. However, September saw an unusual increase in available inventory, according to Redfin.
Gains for inventory are welcome news in the housing market, particularly for first-time homebuyers. Throughout much of the U.S. real estate recovery, tight inventory has been an issued as investors snatched affordable, distressed properties off the market. Many buyers were faced with intense bidding wars.
Given these past challenges, buyers are expected to cautiously respond to the news of more inventory, according to Washington, D.C., Redfin agent Tom Lewis.
“New inventory gets people’s attention and gets them excited, but buyers are wary and know that new listings could be gone quickly if there is a lot of interest,” he said. “Many of them are hesitant to step into a multiple-offer situation because they have lost offers on other homes. But if a home sticks around for a few days, then they’ll be more willing to bite.”
Redfin’s comparison of inventory levels in 2011 through 2014 showed the trend of available homes tapering at the tail end of the year for past years. However, September of this year boasted 2.1 percent month-over-month and 5.9 percent year-over-year gains for new listings to bring the total to 194,472.
Few investors could encourage higher demand
The reported improvements for new listings are good news for homebuyers who are willing to brave the colder winter and go house hunting during winter. Lawrence Yun, chief economist of the National Association for Realtors, noted in a press release buyers will also see less competition from investors.
The NAR September existing-home sales report found individual investors purchased 14 percent of total existing homes sold during the month, down from 19 percent in September 2013. Additionally, all-cash sales dropped from 33 percent to 24 percent for the yearly comparison. These factors, along with improved inventory as indicated by Redfin – NAR also noted a year-over-year gain for inventory – indicate buyers may have an easy time getting a home this winter.
Buyer demand could expand while interest rates are low
Redfin noted the fact that mortgage rates are hovering at historical lows could encourage more consumers to purchase a home before rates go up as expected in 2015. This increase could once again tighten inventory as consumer rush to get affordable financing. According to Yun, low rates have already been a factor, as he attributed a 2.4 percent month-over-month rise in existing-home sales in September to declining rates.
“Economic instability overseas is leading to volatility in the stock market and is causing investors to seek safer bets, which will likely keep interest rates in upcoming weeks hovering near or below where they are now,” Yun said. “This is welcoming news for consumers looking to buy, although they could temporarily become more cautious by less certain economic conditions.”
The latest Primary Mortgage Market Survey from Freddie Mac revealed the average interest rate for a 30-year fixed-rate mortgage was 3.92 percent in the week ending Oct. 23, down from 3.97 percent the previous week and 4.13 percent the same time a year ago. With rates dipping below 4 percent for the first time since June 2013, it’s no surprise consumers would view now as a good time to buy.
Considering Zillow recently reported more renting Americans are taking on roommates to combat rising rent prices, and Trulia determined owning was 38 percent cheaper than renting in the third quarter of 2014, the upcoming slow season for homebuying could present opportunity for many consumers.