theMReport.com Your trusted source for mortgage banking news
Housing demand is starting to cool, according to the Housing Demand Index released by Redfin on Tuesday. The Index dropped to 108—a 13.9 percent decrease from February and an even steeper drop from its record high of 132, reached in January.
Despite dips in demand, March 2017 was still the strongest March for the Index since 2013, when the HDI hit 109. Redfin bases its Demand Index on home tour requests and offers submitted on its website.
Contributing to the HDI’s drop was a 5.5 percent decline in tour requests for the month, as well as a 22.8 percent dip in the number of buyers writing offers. According to Redfin, the declines are likely a result of waning inventory, a problem seen in metros across the country.
“The story in March was once again a limited selection of homes for sale, constraining the options for interested buyers,” Redfin reported. “Across the 15 metros covered by Demand Index, there were 12.5 percent fewer homes for sale than the previous March, marking the 22nd consecutive month of year-over-year inventory declines.”
Rising home prices are also posing a hurdle for many buyers, particularly in the Oakland, California market. According to Redfin, the region’s Index was 62 for March—barely a third of its four-year peak of 175, reached in November.
“The Oakland market has seen huge price increases over the past few years, with a major additional spike in prices and competition in the first few months of 2017,” said Noah Manning, a Redfin real estate agent in Oakland. “This surge was brought on by a combination of factors: a shortage of homes for sale and increased buyer activity due to the Fed’s forecast of multiple rate raises this year, as well as Oakland being one of the last somewhat affordable cities within reasonable proximity to the tech epicenters of San Francisco and Silicon Valley.”
Though low inventory and rising prices are problems, Redfin Chief Economist Nela Richardson said there is still hope for 2017.
“The market is missing its moment because of too-low inventory,” Richardson said. “Mortgage rates are the lowest they’ve been this year. Meanwhile, 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. 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.”
View the full Index at Redfin.com.
