Houses may be more expensive than they were a year ago, but they are selling faster. Residences listed on real estate marketplace Zillow sold in September spent just 86 days on the site—a full 30 days faster than a year earlier.
The reason is no mystery: The supply of available properties is down more than 7 percent year over year, while demand has risen, according to the National Association of Realtors.
"The declining inventory of for-sale homes over the past year naturally creates pressure for buyers to more quickly snap up the inventory that is on the market," said Stan Humphries, chief economist at Zillow. "This demand has been fueled by huge resets in home prices since [the] market peak, historically low mortgage rates and a slowly improving broader economic climate,"
Mortgage rates, though low, are rising and expected to rise further. The average rate on the 30-year fixed conforming mortgage rose to 4.35 percent this week from 4.16 percent, the second straight week of increase, according to Freddie Mac.
"Fixed mortgage rates increased this week following stronger than expected economic data releases, said Frank Nothaft, chief economist at Freddie Mac.
Of the 30 largest metro markets covered by Zillow, homes moved fastest in the San Francisco Bay Area in September, selling in an average 48 days. Sacramento, Calif., and Dallas followed with 59 and 60 days, respectively. Markets where homes are sitting the longest include New York, at an average 151 days; Kansas City, Mo., at 136 days; and Cincinnati, at 125.
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"Housing affordability is being negatively affected by a 'perfect storm' scenario," said NAHB Chairman Rick Judson, a Charlotte, N.C.-based builder. "With markets across the country recovering, home values are strengthening at the same time that [building costs are] rising because of tightened supplies of building materials, developable lots and labor."
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Buyers should resist the urge to enter bidding wars or pay prices out of their comfort zone, he said, adding that he expects the "need for speed" to abate in the new year as higher mortgage rates move many out of the market.
More inventory should also be coming on soon, Humphries said, as some potential sellers cease to be underwater on mortgages and construction picks up heading into the usually strong spring season.
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