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Separate Ways: Prices Rising, Inventory Falling

housing-forecastIt’s no secret in the housing industry that prices have risen year-over-year every month for the last four to four-and-a-half years and are well past their pre-boom peaks in some markets.

In November, however, prices rose at a rate not seen in more than a year, according to Redfin. November’s over-the-year price appreciation rate of nearly 8 percent was the highest in 14 months. Depending on which analysis is used, home prices are expected to rise by another 4 to 6 percent by the end of 2017.

Fourteen seems to be a significant number for housing in November. While prices appreciated at their highest rate in 14 months, inventory fell off by nearly 10 percent, its fastest rate of decline since July 2014, and continued 14-month downward trend, according to Redfin.

Homes sold faster as the supply of homes for sale got shorter, with the average number of days on market falling year-over-year in November down to 50 from 56 a year ago—the fastest pace since Redfin began tracking the data in 2009. They expect it to get even faster—Redfin recently predicted that 2017 would be the “fastest housing market on record” in its forecast for next year.

The good news in November is that home sales increased by 20 percent over-the-year, largest pace since July of last year, according to Redfin.

“Last year we saw a temporary slump in November sales as new mortgage industry regulations went into effect and delayed some closings,” said Redfin chief economist Nela Richardson. “Now, those regulatory hurdles have largely been resolved but the market is by no means back to normal. We’ve seen a pickup in the number of Redfin customers going on tours and making offers the last two months as consistently good economic news has bolstered consumer confidence. The Federal Reserve’s decision to raise rates is unlikely to significantly dampen homebuyer enthusiasm as we enter 2017. We’re still expecting another year of rising prices and modestly growing home sales.”

Redfin predicted that inventory will rise by 1.7 percent by the end of next year after dropping off by 3.4 percent this year, but that the pace of existing-home sales will slow from 3.4 percent in 2016 down to 2.8 percent by the end of 2017.

“Next year, the new administration will lead a shifting U.S. economy,” Richardson said. “Baby boomers will become less economically relevant as millennials continue to come of home-buying age. Superstar cities will create much of the job growth, pushing wages in those cities up. Yet the percentage of homes in America’s largest cities that are affordable on the median income has declined the past two years and will continue to fall in 2017. Sales would be even stronger if there were more starter homes on the market to meet demand from millennial homebuyers. We expect to see more homes built in second-tier cities and more millennial homebuyers moving from the coasts to smaller and inland markets where they can find affordable starter homes.”

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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