Earlier today Bloomberg shared their thoughts that recent data released by the National Association of Realtors (NAR), namely the fact that homes are sitting on the market for a record low average of just 3 weeks before being scooped up, pointed to a devastating shortage of housing inventory for sale. Here was Bloomberg's take:
Here’s more evidence that the defining characteristic of the U.S. housing market is a shortage of inventory for sale: Homes are sitting on the market for the shortest time in 30 years, according to an annual report on homebuyers and sellers published today by the National Association of Realtors.
The typical home spent just three weeks on the market, according to the report, which focused on about 8,000 homebuyers who purchased their home in the year ending in June. That was down from four weeks in the year ending June 2016 and 11 weeks in 2012, when the U.S. housing market was still reeling from the foreclosure crisis. It was the shortest time since the NAR report began including data on how long homes spend on the market, in 1987.
Buyers are snapping up homes quickly at a time when for-sale listings are in short supply, forcing them to compete. The number of available properties declined in September, according to NAR's monthly report on existing home sales, marking the 28th consecutive month of year-on-year decline in inventory.
Moreover, the "inventory shortage' thesis was further reinforced by data showing that a growing percentage of buyers are once again having to pay asking price or more to win their fair share of the American dream.
In addition to moving fast, buyers also had to pony up to close the deal. Forty-two percent of buyers paid at least the listing price, the highest share since the NAR survey started keeping track in 2007.
“With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home,” said Lawrence Yun, NAR chief economist, in a statement. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”
That said, while Bloomberg has taken the 'glass half full' approach in it's analysis, one could also easily make the argument that the housing market isn't suffering from a lack of supply at all but rather an artificially high level of demand courtesy of a combination of perpetually low interest rates and taxpayer subsidized mortgages that require minimal down payments of just 3%.
For evidence of the slightly more pessimistic assessment of the housing market, one has to simply review the fine print included in the NAR report which reveals that the average first-time homebuyer is financing roughly 95% of their purchase price and the tightest housing markets are those that fall below FHA limits. So, what does that tell you about how "tight" housing markets would be if they weren't subsidized by the U.S. taxpayer?
Of course, to suggest that millennials should hold off on purchasing a home until they can actually afford a debt-to-equity ratio somewhere south of 19x is probably considered a hate crime in many social circles so we can understand why it might be avoided.
In any event, here is a summary of the NAR report so you can make your own assessment: