Residential sales levels are
constrained by a lack of new inventory.
MAY 2016 | BY LAWRENCE YUN
Notwithstanding the ups and downs of the transaction pace,
there appears to be a steady stream of buyers in the market, so we can expect
sales to hold steady this year and settle at a pace close to where they were at
the end of 2015.
The chief constraint
continues to be inventory levels, which remain historically low. There were
only 2 million homes available for sale nationwide at the end of March. That’s
just a 4.5-month supply at today’s sales pace. Additional inventory will spur
more transactions and moderate home-price growth.
The latest annual home-price growth of 5.7
percent is unsustainable because incomes are rising by only 2 percent per year.
Either demand will have to fall or supply will have to increase to align price
and income. Many potential first-time buyers are telling us they are less
likely to buy now, since prices are moving beyond the affordable range. That is
why first-time buyers currently account for just 30 percent of the market,
compared with the more typical 40 percent.
Eric Rosa comments - So what else is new. In the end, home sale price increases are dependent on income growth.
