According to the National Association of Realtors (NAR), sales of existing homes increased by 4.4% in March. This marks the fastest sales rate since February 2007. According to Thomson Reuters consensus estimates, economists were forecasting a lesser increase of 2.5%.
Lawrence Yun, a chief economist for the NAR, said, “The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month. Sales will go up as long as inventory does.”
Nela Richardson, chief economist at Redfin, said, “The pace of sales we saw in March is unsustainable. Sales may be soaring, but inventory isn’t.”
According to NAR, sales have now increased to a seasonally adjusted annual rate of 5.71 million units as of March.
It will only take 3.8 months to clear the inventory of houses at March’s sales pace. Yun said, “We had a housing shortage last year, and in the early parts of 2017 the housing shortage has intensified.”
In March, the median house price increased 6.8% compared from one year ago to $236,400 as a result of the tightening of house supply. Yun said, “Bolstered by strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all major regions despite the fact that buying a home has gotten more expensive over the past year.”
The inventory of available properties dropped by 6.6% from March of last year to 1.83 million.
The recovery in the housing market has been assisted by rising wages and falling unemployment which dropped to 4.5% last month.
According to Jennifer Lee, a senior economist at BMO Capital Markets, it’s possible that more Americans are directing their incomes towards housing because retail sales has been on the decline in recent months.
Commenting on the housing market, Yun said, “This is a very broad-based recovery. Both sales, as well as prices, are running very solidly, and buyers are not being deterred by these affordability challenges. Policy changes could quickly change the direction of housing in the second half.”
First-time house buyers comprised 32% of all sales last Month. Sales of single-family home grew by 4.3% while the acquisition of condominiums and co-op units grew by 5% to reach 630,00.
Yun said, “Last month’s swift price gains and the remarkably short time a home was on the market are directly the result of the homebuilding industry’s struggle to meet the dire need for more new homes. A growing pool of all types of buyers is competing for the lackluster amount of existing homes on the market. Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy.”
The average days it takes to sell homes also fell significantly last month to 34 days. It took 45 days in February and 47 days in March.