The National Association of Realtors has adjusted the way they measure the typical amount of time it takes for a home to sell and this new scale shows days on market are shrinking.
Today’s rate is now consistent with historical norms for balances markets. The median time on market for July of this year was 69 days, down 29.6 percent from last year at this time when it was 98 days.
Experts remind sellers, though, to keep in mind that this is the median days on market. This means one-third of homes sold faster and one-third sold slower.
Lawrence Yun, NAR chief economist, said there is a clear relationship between inventory supply and time on market. "As inventory has tightened homes have been selling more quickly," he said. "A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market."
Diminished inventory levels have been having an upward effect on home prices. At the end July there was a 6.4-month supply of homes on the market at the current sales pace, which is 31.2 percent below a year ago when there was a 9.3-month supply.
In such balanced market conditions, home prices generally rise 1 to 2 percentage points above the overall rate of inflation as measured by the Consumer Price Index (CPI).
"Our current forecast is for the median existing home price to rise 4.5 to 5 percent this year and about 5 percent in 2013, which is somewhat stronger than historic norms because of the inventory shortfall that is most pronounced in the low price ranges," Yun said. CPI growth is projected at 2.1 percent for 2012 and 2.3 percent next year.
"Ironically, if housing construction doesn’t pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above average appreciation," Yun said. "Therefore, any unnecessary hindrance to housing starts, such as excessive local zoning regulations or stringent bank capital rules for construction loans, should be carefully re-examined."
Markets all across the nation continue to improve, with 99 markets now making the National Association of Home Builders/First American Improving Markets Index (IMI). The index identifies metro areas that have posted 6 consecutive months of improvements in housing permits, employment and house prices.
This month’s report saw addition in such geographically diverse locations as Tucson, Ariz.; Jacksonville, Fla.; Springfield, Ill.; Greenville, N.C.; and Bend, Ore. Overall the index grew by 19 metro areas in September, up from just 68 in August. Only twelve areas dropped from the list. LA :"More metros across the country are experiencing a sustained uptick in house prices, employment and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase," observed NAHB Chief Economist David Crowe. "That said, overly tight lending conditions for builders and buyers continue to slow this process considerably."
"Combined with recent positive reports on builder confidence, housing starts and new-home sales, the September IMI adds to the growing consensus that housing is finally moving in the right direction, which in turn is spurring more potential buyers to get off the fence," added Kurt Pfotenhauer, vice chairman at First American Title Insurance Company.