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Supply issues still linger nationwide

July 26, 2017

Perhaps the single most important factor in the housing industry over the course of 2017 so far has been the fact that there just aren't a lot of homes up for sale. This issue has affected many different aspects of the market as a whole, from sales figures to home values, and experts believe that's a trend that will continue for some time to come.

"Existing-homes sales across the country fell 1.8%."

Through the end of June, the most recent month for which data is available, the seasonally adjusted annual rate of existing homes sold across the country fell 1.8 percent from the previous month, bringing the total to just 5.52 million from May's 5.62 million, according to the National Association of Realtors . And while that rate was up 0.7 percent on an annual basis, it's also the second-lowest level seen since the start of the year. Experts believe this issue - which came at the start of the normally busy summer buying season - was due entirely to the supply problems seen nationwide.

"Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that's straining their budget," said Lawrence Yun, NAR chief economist. "The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines."

Cause and effect
One state where the inventory has been in particularly short supply is Massachusetts, where would-be buyers now face record-high prices because demand remains strong but the number of homes actually up for sale is quite limited, according to the latest data from the Warren Group. Through the end of June, the Bay State's median home price had risen 6.2 percent on an annual basis, up to $395,000 from the previous June's $372,000. That marked the 15th straight month with a year-over-year increase.

Timothy Warren, CEO of The Warren Group, noted that home sales rates are on the decline simply because of extant supply problems, and that may lead to home price increases that are unsustainable in the long term.

"Production of single-family homes rose 6.3%."

Solving the problem?
While there's probably no real end in sight to this supply issue - not in the next several months, anyway - construction firms are taking advantage of the current demand to the extent they can, according to the latest data from the National Association of Home Builders. Production of single-family homes in June rose 6.3 percent on a seasonally adjusted basis from the previous year, with housing starts overall rising 8.3 percent.

However, Granger MacDonald, chairman of the National Association of Home Builders, added many builders are having problems finding enough skilled labor, and prices on materials still prove prohibitive in some instances.

It's worth noting that, for hopeful buyers, now is still the best time to buy. While prices may moderate at some point, it's not clear when that will be, and in the meantime they should continue to climb sharply. Likewise, it's expected mortgage rates will rise before the end of the year.




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