Housing Inventory Expands, Slowly

By Stevie Duffin Updated on 3/21/2013

By Daniel Duffield

Following Freddie Mac’s predictions that this spring will be the strongest season for the housing market within the past six years, the National Association of Realtors (NAR) reinforced this estimate by also stating that February home sales for existing properties and home prices are heading in a positive direction within the next few months.

According to the NAR, home sales have risen to levels above the previous year for 20 straight months, with prices rising for 12 consecutive months year-over-year.

This growing housing demand can largely be attributed to the scarcity of housing inventory at present. Currently, housing inventory has reached lower levels that within nearly a decade; while the inventory of available properties is slightly rising, many home buyers will find them unable to take advantage of the low mortgage rates available today.

In addition, reports from the NAR indicate that the housing inventory has grown 9.6% to 1.94 million in terms of existing home sales. Such an increase represents a 4.7-month supply with the current pace of home sales, rising from 4.3 months during January.

The January figures reached the lowest point in housing supply since May of 2005. As of February, the year-over-year inventory has declined 19.2%, from a supply of 6.4 months.

Demonstrating a textbook case of supply-and-demand, the national median home price for existing properties for all types of homes rose 11.6% from last February, averaging $173,600 in February 2013.

Not since June 2005 to May 2006 has the housing industry seen twelve straight months of year-over-year increase in home values. Furthermore, February saw the highest increase in prices since November 2005, which saw a 12.9% higher year-over-year figure.

Total sales for existing homes increased 0.8%, reaching a seasonally adjusted average yearly rate of 4.98 million during February, rising 0.04 million from January’s 4.94 million. Sales of existing home sales grew 10.2% from the 4.52 million in February 2012.

Sales in February hit the highest peak since November 2009, at the time of the tax credit, the NAR indicated.

According to Lawrence Yun, chief economist of NAR, job growth, a strengthening economy, and stifled demand have been the primary causes of the increases in home sales and rental leasing. While home prices have seen larger increases than rental prices, the low mortgage rates available in the mortgage market preserve the affordability of home purchases.

Distressed home sales averaged 25% of total home sales in February, far below the 34% total in February 2012.