Homes for sale have been short of demand in recent years, as fewer people choose to move out of their homes. While this has had a detrimental effect on first-time homebuyers, they are finding ways to overcome.
During the second quarter of 2018, the inventory of previously owned homes averaged 1.87 million units, down 4% from the prior year. This decline directly accounts for half the decrease in existing home sales. Year-to-date, homes are staying on the market an average of 3.8 months; in a balanced market that figure would be around six months. This implies there should be approximately 2.7 million units on the market, a current shortfall of more than 800,000 homes. The housing market definitely benefits sellers right now, and home prices are likely to increase to their benefit.
Limited inventory is accelerating price. In 2015, the increase was 5.5% compared to 7% this year. The price increases coupled with rising interest rates significantly drive up the overall price for first-time homebuyers. For example, a homebuyer purchasing their first home this year will pay 12.6% more per month for their mortgage versus purchases from one year ago (6.5% from price increases and 5.7% from increased interest rates).
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