So far, the housing market of 2015 has been just as difficult to predict as 2014. According to the National Association of Realtors (NAR), existing home sales fell in April after experiencing a March surge that produced an eighteen-month high. Sales dropped by 3.3% in April to an annual rate of 5.04 million (seasonally adjusted) from the 5.21 million in March. Single-family homes were the primary culprit, with a 3.7% decline.
While some of the March surge was attributed to the end of a brutal winter, economists had predicted that positive momentum would continue into April. The median estimate from Bloomberg was 5.23 million in sales, but those predictions were dashed by low supply and high prices.
Lawrence Yun, chief economist with NAR, said that feedback from realtors shows higher buying interest than one year ago — backed up by April's 6.1% increase over last April's sales — but that the drag on existing home sales is "a result of lagging supply relative to demand and the upward pressure it's putting on prices." The number of listings in April compared to last year actually decreased by almost 1%.
The inventory of unsold existing homes rose to 5.3 months, an improvement on the 4.6-month supply in March but not yet at the 6-month supply indicative of a balanced market.
If you are in a position to sell your home, April's numbers are good news for you. The still-tight supply raised the median price for existing homes to $219,400, an almost 9% increase. NAR adds that approximately 40% of the homes sold in April went for at least the asking price, which is the greatest percentage since that data tracking began in December 2012.
The housing market still seems stuck in an odd cycle. The economy has improved enough to entice more buyers into the market, but there are not enough people in sufficient economic shape to sell and upgrade their housing without an immediate need to sell. Thus, home prices are rising through basic supply and demand, squeezing more potential buyers out of the market.
By contrast, new home sales rose in April by 6.8% to a seasonally adjusted annual rate of 517,000 — not enough to bleed the pressure off the existing home market but a positive sign nevertheless. This occurred despite higher prices and an even shorter supply. Median new home prices are up to $297,300, and the inventory sits at 4.8 months' worth of new homes. The pace of new home building picked up in April but not enough to compensate for the higher demand.
Taken as a whole, the April numbers are indicative of the entire economic recovery — slow, ragged, and uneven. It is more useful to look at the broader situation than it is to analyze monthly changes.
In essence, there is pent-up demand for housing but not enough supply of homes to meet it, and there may be a mismatch in the types of homes available to the types of buyers. It will take more time for wages and savings to rise enough to see an across the board recovery in housing.
If you are searching for a home, you may need to redouble your efforts or consider whether to adjust your goals on the type or size of home you want to buy. Home prices may equilibrate as the supply eventually increases, but interest rates cannot stay as low as they have been forever.
With economists expecting interest rates to rise in 2016 (if not the end of 2015) this may be your window of opportunity to buy — even with poorer choices. A rising base price of the home can easily be surpassed by higher mortgage rates.