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    Just in – 2016 is Looking (Really) Good for Home Sales


    It took a bit of time to gather all the data, but the January housing and economic reports are now available. Things are looking really good!

    Though employment growth is below 2015’s monthly average, 151,000 jobs were created in January. Unemployment is now near 10-year lows and in line with the current macro forecast from the National Association of Realtors® (NAR). It is expected that this level of employment growth should translate into a 3% growth in housing sales.

    Sales are taking longer to close due to the implementation of new disclosure and closing forms and procedures, but existing home sales increased by 0.4% from December to January. That may not sound like a lot, but analysts were expected a decline. From January 2015 to January 2016, existing home sales grew by 11%.

    The increase in existing home sales has created a very tight supply; NAR reports this to be four months. For those of us who are not economists, this means that it would take four months to sell the current inventory of available homes at the current pace.

    Six to seven months’ worth of homes on the market is considered normal. Four months is tighter-than-tight! What happens in a tight market? Prices are driven higher. Those who plan to buy this year should get started right away.

    New home sales and construction remained consistent in January with the pace of activity over the last several months. New construction levels show solid year-over-year growth, especially for single-family homes. As builders offer more affordable homes, the median price of new homes is finally declining.

    Realtor.com reports that demand is growing rapidly at the start of 2016, resulting in accelerated inventory movement not usually seen until March or April.

    The most significant negative trend which impacts potential demand is found in the declines in stock values during January and February; that affects consumer confidence. However, that negative trend has an upside; mortgage rates are now substantially lower. The average 30-year conforming rate has stabilized at under 3.7%, giving buyers almost 5% more buying power that they saw at the end of 2015 and assisting their ability to meet the debt-to-income ratio required for loan qualification.

    All-in-all, demand seems stronger than financial market weakness. Lower rates should encourage potential buyers to act sooner rather than later. After a strong start, 2016’s biggest problem is the tight supply.

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