Last week’s Existing Home Sales Report from the National Association of Realtors (NAR) shows sales have dropped by 3.7% compared to the previous month. This is the second consecutive month that sales have slowed and some see this as evidence that the red-hot real estate market may be cooling. There could also be a simple explanation as to why existing home sales have slowed, however – there aren’t enough homes to buy. There are currently 410,000 fewer single-family homes available for sale than there were at this time last year.
Lawrence Yun, Chief Economist at NAR, explains in the report:
“The sales for March would have been measurably higher, had there been more inventory. Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”
Yun’s insight was supported the next day when the Census Bureau released its Monthly New Residential Sales Report. It shows that newly constructed home sales are up 20.7% over the previous month, and 66.8% over March of 2020’s numbers.
Buyer demand remains strong. With more of the adult population becoming vaccinated and job creation data showing encouraging signs, existing-home inventory is expected to grow in the coming months.
What will this mean for home sales going forward?
Fannie Mae, Freddie Mac, and the Mortgage Bankers Association (MBA) have all forecasted that total home sales (existing homes and new construction) will continue their momentum both this year and through 2022. While their specific projections differ, the graph below shows those estimates:
Included in the above links are also projections on mortgage rates. While last week saw a brief reprieve of quickly rising rates, each of the above sources foresee rates rising to between 3.4%-4% by the end of 2021.
Living through a pandemic has caused many to re-evaluate the importance of a home and the value of homeownership, leading to a wealth of new buyers entering the market. As we move further into spring, additional listings should enter the market, prompting the stewardship of qualified buyers to become fast moving clients.