Currently, the United States faces loathsome housing market conditions. Throughout this year, the housing market displayed disappointingly. Recent reports did little to reverse this trend.
Reports Highlight Loathsome Housing Market Conditions
As mentioned, recent reports highlight the currently loathsome housing market conditions. In July, both new and existing home sales decreased a little from June. Existing home sales make up roughly 90% of the market. Sadly, existing home sales saw the fifth straight month of declines. More so, existing home sales came out even lower than a year ago.
Meanwhile, the inventory of existing homes available for sale fell slightly from June to a 4.3-month supply. Market analysts consider a 6-month supply to be a healthy balance between buyers and sellers. Sales of new homes fell to the lowest level since October 2017.
Factors Contributing to Loathsome Housing Market Conditions
Throughout this year, a number of factors contributed to the loathsome housing market conditions. As a result home sales lost their upward momentum.
Lack of Home Inventory
Home sales lost their upward momentum in many reasons due a lack of inventory fueling the loathsome housing market conditions. This holds especially true for lower-priced homes.
Also, single-family home construction remains flat from a year ago. Single-family home construction continually fails to meet the demand at the lower end of the market. Builders say that rising land, material, and labor costs face obstacles to a faster pace of construction. Additionally, entry-level homes offer lower profit margins. Because of this, home builders are not as incentivized to create these homes.
For decades, single-family housing starts averaged about 1.1 million per year. Following the financial crisis in 2008, this figure fell to a low of 350,000 in 2009. Now, single-family housing starts hold steady at levels around 850,000.
Demographic Changes Throughout Real Estate Market
Throughout the real estate market, demographic changes slow home sales, contributing to the loathsome housing market conditions. Today, younger people often place a higher emphasis on mobility than they did in the past. They acknowledge the possibility of quick job changes. Also, younger folk value the option for living in different cities, which favors renting over owning.
Younger generations tend to want to live closer to downtown or other popular neighborhoods. Oftentimes, these neighborhoods are more expensive. Surveys indicate that millennials today are more likely to wait until they get married or have children to settle down and buy a home.
Looking Ahead
Looking ahead to the loathsome housing market conditions, there does remain a beacon of hope. While home sales stalled, this does not necessarily indicate a weakening housing market.
Knowing that buyer demand is there, home builders are diligently trying to ramp up production. The economy and the labor market remain quite healthy. Younger people may be waiting longer on average to purchase homes. However, this is simply postponing demand to the future. In short, current economic conditions combined to temporarily dampen home sales, but there are plenty of reasons to be optimistic going forward.
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