CLARK: Low inventory and interest rates

The shortage of available homes for sale, in part, is attributed to a significant slowdown in new home construction across the country. This has put upward pressure on home values in certain parts of the country. According to the National Association of Realtors (NAR), the decrease in home construction for all types of housing in approximately two-thirds of 146 metro’s surveyed has caused a significant “drop” in homes for sale.

There also remains millions of homeowners who still owe more on their mortgages than its market value. The number of underwater homeowners combined with fewer new homes being built has caused low inventory of available homes for sale. Also, there are less distressed properties (i.e. short sales and foreclosures) for sale. Distressed properties constitute 9% of the real estate market. This is down considerably from the 35% these homes accounted for of the housing market just several years ago.

According to the Chief Economist for NAR, Mr. Yun, the demand for buying has markedly improved this year and is at a rate that has been seen since 2007. Local job markets continue to grow, fueling the demand to buy homes. Mr. Yun is recommending developers to shift from building units for rent to building units/homes for sale.

Housing starts in August decreased 3% according to the Commerce Department. Development activity dropped in the Northeast and Midwest and dipped in the West while rising in the South.

The median sales price for a single-family home reached a new high in June. This exceeded the median sales price during the housing boom in July of 2006. Rents are also up 4.2% across the country while incomes have only increased 2%. The rise in rents is attributed to downsizing baby boomers and millennials entering the job market.

Last week the Federal Reserve decided not to raise the interest rate. It remains at the same rate since December of 2008. Fed officials believe the economy is well on the way of becoming healthy such that a slight interest rate increase not a volatile stock market will not adversely affect it. Although the inflation rate was below the central bank’s 2% goal for the last few years, Fed officials anticipate it will rise in 2016.

Officials of the Fed still wish to see economic data and financial data to support their “underlying assumptions”. Inflation data has been falling below the Fed’s expectations for years. The fall in oil prices and a strengthening of the dollar since July will only hold inflation at bay.

Although the unemployment rate is low, it is unknown whether the stock market volatility, partly attributed to the Chinese economy, is going to cause long-term problems to the U.S. labor market. Presently, unemployment is essentially back to “healthy” levels at 5.1%, but inflation is not increasing and the outlook for the global economy looks problematic.

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]

By participating in the comments section of this site you are agreeing to our Privacy Policy and User Agreement

© Hersam Acorn. All rights reserved. The Greenwich Post, 10 Corbin Drive, Floor 3, Darien, CT 06820

Designed by WPSHOWER

Powered by WordPress