There are signs that some of the hottest markets may be slowing down, while those slow to rebound are finally heating up.
As the U.S. housing market has recovered from the Great Recession, homebuyers have been faced with declining inventory and worsening affordability. However, there are signs that some of the hottest markets on the Costly Coasts may be slowing down while slow-to-rebound markets in the Bargain Belt are finally heating up.
In this edition of Trulia’s Fastest Moving Markets Report, we not only look at how fast homes are moving off the market this home-buying season, but how those markets have changed over the past year. We found that:
- Nationally, homes are moving off the market faster than last year: 66.6% of homes are still on the market after 30 days, which is down slightly from 67.8% from the same period a year ago. About 63.4% starter homes and 59.8% of trade-up homes are still on the market after a month, which is 2.1 and 3.1 percentage points faster than last year.
- Homes are moving fastest in San Jose and Oakland, but moving slowest in Fairfield County and Long Island, N.Y. Metros east of the Mississippi have sped up the most, while many to the west have slowed. Houston, a city where the economy has been hit by lower oil prices, has slowed the most, but homes are moving much faster than last year in Colorado Springs, Colo.
- Inventory matters: Markets such as Colorado Springs that have experienced the biggest drop in available homes for sale during the past year are seeing more homes moving faster.
Home Moving Slightly Faster Than Last Year, Trade-up Homes See Largest Jump
Nationally, 66.6% of the homes listed for sale on March 6 were still on the market on April 6, which is down from 67.8% for the same period last year. However, not all segments of the market move alike: fluctuations in inventory – which affects the time that homes stay on the market – can behave quite differently within different price points (starter, trade-up homes, etc.).
To see how quickly homes are moving by segment, we evenly divided all homes in each of the 100 largest U.S. metros into three price tiers and gave each metro its own price cutoffs based on what’s considered high-end, mid-range, and low-end – what we call premium homes, trade-up homes, and starter homes, respectively. We then counted the share of each that was still on the market after one month.
The bad news for first-time homebuyers is that the pace at which starter and trade-up homes are moving has quickened much more than premium homes. Last year, 65.5% of starter homes were still on the market after a month, compared with 63.4% this year. Trade-up homes are moving even faster, moving from 62.9% still on the market last year to 59.8% this year. On the other hand, premium homes have barely budged, having increased slightly to 71.5% from 71.8%. Much of this is likely due to the fact over the past few years, inventory of both starter and trade-up homes have fallen much more than premium homes. However, the national trend hides big differences from one local market to another. In some metros, the sales pace is quickening, while slowing in others.
Homes Coming off Market Much Slower in Bay Area, Houston
The San Francisco Bay Area still reigns as the region with the fastest moving markets, with San Jose, Oakland, and San Francisco topping the list. In fact, less than 42% of the homes for sale in these three metros remained on the market after one month. But there is consolatory news for homebuyers in the Bay Area: the the pace at which homes are coming off the market is slowing.
Our one-month measure is similar to a common housing statistic: days on market (DOM). In general, housing markets with more inventory and fewer buyers will have a higher share of for-sale homes remaining on the market after one month and a higher median DOM. But we prefer our one-month measure over the widely watched DOM as a way to determine how quickly homes are moving in a market. Why? We think DOM is potentially misleading. If lots of new inventory suddenly lands on the market, then median DOM could fall thanks to all those newly listed homes. Thus, a low median DOM might indicate that buyers are snapping up homes quickly, so homes aren’t staying on the market long (a seller’s market). But it could also signal that a lot of new inventory has just come onto the market (a buyer’s market). As a result, it’s difficult to decipher what’s really going on based on DOM alone.
- See more at: http://www.trulia.com/blog/trends/fast-moving-markets-spring16/#sthash.G8Wdmcys.dpuf