Americans Still Eager to Buy Homes Despite Low Inventory

February’s NAR numbers show home sales have tapered due to limited supply, but a new survey from NAR shows Americans still want to buy homes.

After several months of strong sales gains, the housing market encountered a month-over-month drop in existing home sales due to limited supply of homes for sale. Sales of existing homes dropped 7.1% month-over-month, according to the latest release from the National Association of Realtors (NAR). The market did squeeze out a 2.2% gain compared with February 2015.

The source of this drop, according to Lawrence Yun, NAR’s chief economist, was not that Americans didn’t want to buy homes; it was that they couldn’t find suitable homes to buy.

“The main issue continues to be a supply and affordability problem,” he said. “Finding the right property at an affordable price is burdening many potential buyers.”

Americans are eager to buy homes

The good news is that consumer sentiment about home buying, buoyed by an improving economy and falling unemployment rates, has been positive, according to a NAR survey of American households released last month. Three quarters of Americans believe that it’s now a good time to buy a home.

This is despite a significant increase in the price of a typical home lately. Nationally, the median home sold in February cost $210,800, 4.4 % more than it did 12 months earlier.

However, Americans are not so eager to sell

Only 56% of home owners told NAR that they thought it was a good time to sell. The other 44% thought they could get a better price in the future, contributing to the tight supplies of homes for sale that plague some markets. Housing is in short supply in coastal California, Seattle, Washington, D.C., New York, Boston, and many other places. Even some markets that are historically steady, such as Chicago, are experiencing inventory problems. Nationally, there’s just a 4.4 month supply of homes for sale at the current sales rate.

The nation’s home builders have geared up to meet demand. Housing starts jumped 31% in February compared with February 2015 to an annualized rate of 1.178 million units, but buyers still outnumber sellers in many areas.

That has resulted in home prices that have grown faster than incomes. Luckily for consumers, mortgage rates remain near historical lows, making financing a home purchase much more affordable. The average 30-year fixed rate mortgage went for about 3.66% in February.

Millennials want the same homes their parents owned

Americans still cling to their desire for that big house in the suburbs. Three quarters of renters said they want to purchase a single-family home.

NAR’s survey revealed something that industry insiders knew all along: Americans still cling to their desire for that big house in the suburbs. Three quarters of renters said they want to purchase a single-family home.

“The American Dream for most consumers is not a 500-square-foot condo in the middle of the city, but instead a larger home within close proximity to the jobs and entertainment an urban area provides,” said Yun. “While this is not a new discovery, supply and demand imbalances and unhealthy levels of price growth in several metro areas have made buying an affordable home an onerous task for far too many first-time buyers and middle-class families.”

Les is a Real Estate Market Specialist for Coldwell Banker Real Estate.

Born and raised in Whitestone, N.Y., and never having lived outside of NYC, Les is a graduate of City College of New York in Manhattan. Les switched careers in his late 30s, studying writing at New School and Brooklyn Polytechnic, now the New York University Polytechnic School of Engineering. Les has written for several magazines and copyedited books on early childhood education prior to joining CNNMoney as a personal finance writer, where his main beat was real estate. His wife and partner of 42 years is a retired magazine editor who spent her career at the New York Zoological Society (Bronx Zoo). They are residents of the Upper West Side.

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