Housing Market Cools Off as Inventory Slows

Author: Tory Barringer October 20, 2014Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services11

Housing indicators cooled off slightly in September, marking the annual start of what is typically a slower season for the market, according to a report from listings site Realtor.com.

At the national level, Realtor.com reported the median age of September's housing stock was 90 days, four days longer than August's median age as home shoppers back off for the season. Compared to last year, however, September's median inventory age was down three days, indicating demand is still there.

The number of listings last month was approximately 1.87 million, down 2.7 percent annually and 7.9 percent monthly. The decline compares to Redfin's latest analysis, which showed an unexpected bump in inventory from new listings. Redfin's data measures a narrower list of markets nationwide.

As other market indicators have seen steady improvement, inventory has remained a consistent problem, with shortages across the country limiting buyers' options and pushing prices beyond affordability in some areas. According to the National Association of Realtors' latest existing-home sales report, the nation's housing stock sat at a 5.5-month supply in August, short of the six- to seven-month supply considered to be a balanced market. New homes were in even shorter supply at nearly five months.

"To truly relieve the inventory shortage on a sustained basis, new home construction needs to rise by at least 50 percent from the current levels," said Lawrence Yun, chief economist for the National Association of Realtors.

Though the market's pace has slowed nationally, Realtor.com found 12 major metros are still selling quickly, with each one seeing a median inventory age of less than two months. Those markets include a number of California metros—Oakland, San Jose, San Francisco, San Diego, and Los Angeles-Long Beach—as well as a handful of others around the country, including Denver, Seattle, Houston, Austin, Omaha, Melbourne, and Washington, D.C.

Though largely spaced out geographically, those markets have a number of factors in common that are helping to drive their local housing markets: Notably, they feature the best opportunities for math and science professionals, and they're home to large baby boomer populations.

As Realtor.com explains in its report, the first group tends to pull in a higher median income and brings enhanced buying power, while the second group is rapidly coming to an age when they have to make retirement-related housing decisions.

"When we see homes moving quickly in a particular market, we expect the trend to be supported by signs of local health like growth in economic production and employment," said Jonathan Smoke, chief economist for Realtor.com. "This month, we also observed more out of the ordinary trends including high proportions of math and science professionals, as well as baby boomers in each of the fast moving markets. As the technology industry grows and aging baby boomers decide to make housing moves to support their retirement, we'll continue to see strong housing demand associated with these factors."