Many eager home buyers were ready to hit the ground running in March, only to realize that the available housing supply had no chance of satisfying their collective demand. Pending home sales crept up on a monthly basis in March but were still down 3% compared to a year prior.
A shortage of homes for sale is bottlenecking activity in the housing market. This lack of supply is most significant in the lower end of the market, which has created an awkward situation for many young first-time buyers. Even though most young buyers are in their prime home-buying years with decent salaries, millennials are still struggling to find and afford homes.
- March pending home sales increased 0.4% month-over-month but decreased 3% year-over-year
- The lack of housing inventory stifled pending home sales, despite strong demand at the start of the typically busy Spring season
- Home prices and interest rates will continue to grow throughout the year, sustaining a tight housing environment
Signed contracts to purchase existing home rose just 0.4 percent in March compared to February, according to a monthly pending home sales index from the National Association of Realtors. February’s reading was revised down.
These contracts are a forward-looking indicator of closed sales in April and May. The index was down 3 percent compared to March 2017, marking the third straight month of annual declines.
The biggest challenge in today’s housing market continues to be a severe shortage of homes for sale, especially at the lower end of the market, where demand is highest. There were about 9 percent fewer homes on the market in March compared to a year ago, pushing prices up 8 percent, according to Zillow.
“What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy,” Yun said.
Millennials are solidly in their home-buying years, but affordability is sidelining some potential buyers. In fact, after rising for the past two years, the millennial homeownership rate dropped in the first quarter of this year, according to the U.S. Census.
Millennials are facing high prices, low inventory and high levels of student loan debt. Now they are also facing higher mortgage interest rates.
View the original article at CNBC