The United States Commerce Department recently reported that home construction slowed in January.
According to the department, housing starts decreased 8.5% in December to a seasonally adjusted annual rate of 890,000. The largest sector, reporting a 26.1% decrease, was condominium construction. However, the good news in this report is that housing starts increased 23.6% from the year prior.
Construction of single-family homes, which comprised approximately two-thirds of housing starts in January, increased 0.8% and was up 20% from a year ago. This is the highest this sector has risen since July 2008.
Realtor.com’s data shows there were 1.48 million homes listed for sale at the end of January. This is down by 5.6% from December of last year and down by 16.5% from the prior year, which is the lowest level since the compilation started in 2007. The National Associate of Realtors also reported last month that inventory ended in 2012 at an 11-year low.
It’s typical for inventories to decrease in December and January since the weather can be difficult in certain areas of the country and homeowners often wait for the spring season to list. However, the shortage of homes for sale is increasing in many U.S. markets. At some price points in various areas, the shortage of inventory is even causing bidding wars over what is available.
In Greenwich 1,102 single-family homes and condominiums were listed for sale in 2011 compared to 1,209 in 2012, according to Greenwich MLS. Buyers should be mindful since some of these homes may have been on the market before and re-listed.
The areas that had the most significant drops in home inventories last year that ended up having increases in their inventories this January were Orlando, Phoenix, Atlanta, and Fort Lauderdale. But there are several other areas still experiencing declines, including San Francisco and Seattle.
The reason why inventory are low is because housing demand has risen over the past 18 months as investors bought distressed properties and home buyers began returning to the market with low interest rates and the lure of more affordable properties. Investors turned their home purchases into rentals, which has kept them from returning to the market.
Federal Reserve officials are divided on their “easy money” policies. Some fear it will cause risk-taking and destabilization of the economy. The Fed is purchasing $85 billion in mortgage and U.S. Treasury securities a month to lower long-term interest rates. The Fed had vowed to keep short-term rates near zero until unemployment improves or becomes 6.5%.
From some financial analysts’ perspective, banks and investors have riskier debt, companies are issuing large amounts of junk bonds, and “exotic” mortgage securities and corporate loan markets are on the rise. Fed officials reserve the right to change tacks should there be perceived threats to the financial system.
Buyers in Greenwich are searching for homes as they are benefiting from homes being appropriately priced while interest rates remain low. New listings are needed to address the pent-up buyer demand.
Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected] or she may be reached directly at 203-249-2244.