When the February numbers came in, existing home sales were up 1.2% to 4.88 million in February from 4.82 million in January, with a median price of $202,600 which is 7.5% above last February. This makes the 36th consecutive move of year over year gains, as we continue to shake off the cobwebs of the Great Recession.
Lawrence Yun, the chief economist for the NAR (National Associations of Realtors) says, “Although February sales showed modest improvement, there’s been some stagnation in the market in recent months. Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” he said. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”
As stated the housing market is a very local issue, and every area and pockets of areas have their own supply and demand curves. Basic economics teach us that people want to sell at high prices, not low prices….really?!? well, DUH! In other words when supply is tight prices go up until supply and demand balance and people pay the highest possible price and sellers supply the highest amount of homes that people are willing to buy.
I would argue that we are close to equilibrium in the single family market. Yun refers to “stagnation” in the market; I think a better term would be “equilibrium” in the market. This is very healthy, and it would be more alarming if we have large swings in either supply or demand, so “stagnation” is a very good thing for a change.
Above market prices or supply should more concerning to both home shoppers, owners, and economist than “stagnation.” I live in a “hot” real-estate market here in the Raleigh/Durham NC area. We are still getting stories of over asking prices with multiple offers on the first day on the market. While we enjoy a “hot” market you hear other stories of houses siting in foreclosure or on the market for months with no activity at any price. Neither one of these scenarios is healthy for the market. A “hot” market like we have in the Triangle of NC leaves sellers happy, and buyers upset, while areas that were Ground Zero for the housing fallout leaves unhappy sellers and joyed buyers.
For once it is good to write about an efficient market. Depending on if you are a buyer or seller is if you think that this market is good or bad. At the end of the day as an economist I am happy to see both sides of the equation (the supply side and demand side) equally unhappy for a change!