The median time a home was listed for sale on the market1 was 69 days in July, down 29.6 percent from 98 days in July 2011. The median reflects a wide spectrum; one-third of homes purchased in July were on the market for less than a month, while one in five was on the market for at least six months.
Lawrence Yun, NAR chief economist, said there is a clear relationship between inventory supply and time on market. “As inventory has tightened homes have been selling more quickly,” he said. “A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market.”
At the end July there was a 6.4-month supply of homes on the market at the current sales pace, which is 31.2 percent below a year ago when there was a 9.3-month supply.
There are consistent and related findings between annual consumer research in NAR’s Profile of Home Buyers and Sellers, and sets of data in the existing-home sales series, that show current market conditions are comparable with median selling time in balanced markets.
In periods where the existing-home sales series averaged close to a 6-month supply of homes in listed inventory, which is near the low end for market equilibrium, the home buyer and seller series showed a median selling time of just over six weeks.
In such balanced market conditions, home prices generally rise 1 to 2 percentage points above the overall rate of inflation as measured by the Consumer Price Index.
“Our current forecast is for the median existing home price to rise 4.5 to 5 percent this year and about 5 percent in 2013, which is somewhat stronger than historic norms because of the inventory shortfall that is most pronounced in the low price ranges,” Yun said. CPI growth is projected at 2.1 percent for 2012 and 2.3 percent next year.
From 1987 through 2011, analysis of the NAR Profile of Home Buyers and Sellers series showed the typical time on market was 6.9 weeks, while the existing-home sales series showed an average supply of 7.0 months, just above the high end for a balanced market.
The new measure of days on market shows a longer selling time than the historic findings which measured traditional sellers of non-distressed homes. The new series include short sales that typically took three months or longer to sell. “Factoring out short sales, the median time on market for traditional sellers appears to be in the balanced range of six to seven weeks,” Yun explained.
During the peak of the housing boom in 2004 and 2005 when inventory supplies were historically low, averaging 4.3 months2 over the two-year peak period, the median selling time was 4 weeks. Prices in that time frame were bid up and rose at an annual rate of 10.3 percent, historically higher than the 3.1 percent average growth in CPI during the period.
In the economic downturn, time on market for non-distressed sellers peaked at 10 weeks in 2009 with a 10.0-month annualized supply. The median price fell 12.9 percent that year, which was the biggest annual decline on record.
“Ironically, if housing construction doesn’t pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above average appreciation,” Yun said. “Therefore, any unnecessary hindrance to housing starts, such as excessive local zoning regulations or stringent bank capital rules for construction loans, should be carefully re-examined.”
Michelle Farber Ross