The spring of 2016 was the best spring for home sales in over ten years. The momentum of the record-breaking spring has continued into summer, and has even gained steam. The chief economist for realtor.com, Jonathan Smoke, has crunched the numbers, and the results show that from May through July, this summer has seen the best home sales in the past ten years.
Factors Behind the Record Breaking Summer
It’s no secret that the housing industry has been slow to recover from the great recession. While the industry still has not seen a full recovery, a sharp increase in home sales and housing prices has continued for much of 2016.
There are several reasons for these spikes. Consumers are finally feeling more secure and confident in their employment and their financial situation. People are reluctant to make a large investment in a home when they are worried about losing a job or paying the bills. The low inventory of new houses and tight credit markets mean there are more buyers and fewer homes. This has pushed up housing prices in many markets across the United States.
However, despite the increase in housing prices, more people are buying a house now. This is a result of pent-up demand from over two years of increasing prices and smaller inventories. Many people simply cannot, or do not want, to wait any longer to get into a home.
July also saw the first decrease in the median home price, down one percentage point over the previous month, since January. The buyers this summer have also been slightly older than typical. Some of this may be normal seasonal change, but some of it may reflect the need for greater purchasing power when buying a home in the current market.
The coming fall and winter are likely to follow standard seasonal trends, and the housing market should cool. There are many reasons to believe that next spring and summer will not see a peak in sales and prices over this year’s numbers.
Some factors that may impact the housing market include the difficulty of many in the construction industry to secure financing for new projects. Smoke estimates there are 500,000 fewer units on the market than there should be. This tight inventory may push prices beyond what the remaining buyers in the market can afford. Additionally, many prospective homebuyers are also feeling the pinch of tight lending practices, making getting into a new home impractical.
2016 has been great for a housing industry that has sorely needed good news. The summer home buying season is not over yet, and it looks like the rest of the summer will continue to set records. Many markets are reporting fast moving inventories and highly motivated buyers. Hopefully, this peak will carry through the fall and winter and make for a stronger than usual off-season.
Please see our Market Reports for a complete city by city analysis on the Marin County real estate market.
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