Where Housing Demand Is Shifting

Redfin has released a report, the Redfin Estimate, which tracks the average monthly cost of the median home-sale price across the nation. The report shows that despite a drop in home sales in September from last month—with prices posting their smallest growth since the market bottomed out in 2012—the crunch in housing inventory may finally be loosening.

According to the report, the median home-sale price was $292,000 across 171 metro areas. That’s the smallest increase in prices since February 2012, when median home prices reached a low of $168,000.

Still, for the first time in almost three years, the total number of homes on the market has increased year over year—if only a little—up 0.2 percent from September 2017. In terms of new homes listed, the number rose a solid 3.6 percentage points. National inventory growth was buoyed most in cities like San Jose, Seattle, San Diego, and Boston. San Jose showed an increase of 82.7 percent, Seattle 54.5 percent, San Diego 30.7 percent, and Boston 9.1 percent.

The housing supply in Indianapolis, conversely, has been falling by more than 10 percent per annum since Spring 2015. It fell a noticeable 19.7 percent this September compared to last year. In Grand Rapids, homes on the market fell 2.3 percent, a modest decline in comparison to the 5.6 percent decline a year ago, and even smaller compared to the 21.2 percent decline two years ago in September 2016.

Two percent of those seeking homes in Grand Rapids on Redfin.com searched from outside the metro area, with the largest share coming from Detroit, Chicago, Los Angeles, and Washington, D.C.  Indianapolis is also attracting homebuyers from more expensive cities, including Chicago, Los Angeles, and the Bay Area. That’s telling, says Daryl Fairweather, Chief Economist for Redfin.

Fairweather points to the fact that these expensive coastal markets saw a slump in sales by at least a double-digits. This has in turn kept price growth down nationwide and allowed for a greater net of sales in inland metros where more affordable housing—metro areas such as Pittsburgh, Pennsylvania and Grand Rapids, Michigan—are seeing inventory continue to tighten.

"Rising mortgage rates, paired with already high home prices, are giving pause to homebuyers in the expensive West Coast markets," Fairweather said. "Some of these places are finally seeing the number of homes for sale surge after years of a supply drought. But buyers who earlier this year would have put in a bid on any home in their target neighborhood are now being more choosy. With home prices growing slowly, buyers want to be absolutely sure that the home they buy is a home they will stay in for years to come."

"Last year and earlier this year, Seattle, San Jose, and Denver were the hottest markets with homes selling in days, not weeks,” Fairweather continued. “These metros have now been replaced by Grand Rapids, Omaha, Nebraska, and Indianapolis as the fastest markets in the country. This acceleration in Midwest metros is due to increasing demand, as new residents move inland in search of affordability, without an increase in homes available for sale.”