The housing market’s performance so far this year left a lot to be desired, but Redfin (www.redfin.com) expects the market in urban areas to regain its footing over the second half of 2014. In the June 2014 Redfin Housing Market Tracker, Redfin chief economist Nela Richardson predicts a late summer rebound for four reasons:
1. Sales are catching up to 2013’s highs.
With 114,240 home sales, June 2014 came close to the high bar set last year, which was the strongest year for home sales since the recession. In June, sales were down only 2.5 percent year over year. Sales in the second quarter of 2014 are up 45 percent from the first three months of the year.
2. Homebuyer demand is up.
Redfin data shows that the number of customers going on tours with Redfin agents in June was up 27.1 percent from a year ago. Tour growth in bucking seasonality trends, which tend to peak in May. This indicator of buyer demand continues to strengthen as we head into the second half of the year.
“In Atlanta, the market slowed in late spring and felt really quiet around Memorial Day. But once summer officially started, the buyers came back,” said James Marks, Redfin real estate manager for the Southeast region. “Last year, a lot of homebuyers who got frustrated by the low inventory gave up on buying and re-signed their leases. Their leases are about to expire and now they’re back, taking a fresh look at the new, but still limited, inventory.”
3. Price growth is becoming more sustainable.
Even as the median sales price in June topped $300,000 in urban markets, price growth reached a two-year low of 6.4 percent. Prices over the past three years have been an expensive roller coaster for both buyers and sellers, depreciating in 2011 and jumping by double digits by the end of 2012. Price growth through 2013 averaged 14 percent. In June, the median sales price grew at half that rate, much more in line with a sustainable rate that won’t have the market panting to keep up.
4. Home inventory is returning, albeit slowly.
In June, for a second month in a row, the number of homes for sale was above 500,000 — up 8 percent from this time last year. In 22 of 30 markets, there were more homes for sale than last year. The biggest year-over-year increases in homes for sale were in Riverside, California (28.1%), Phoenix (25.2%) and Orange County, California (24.6%).
So while the main long-term drivers of housing activity remain stalled — namely below-average growth in median household income, labor force participation, bank lending and household formation — metro markets continue to get a boost from pent-up demand caused by the low inventory that plagued housing for the past two years.
The second half will not be without its wobbles. The housing market will have to jockey between poor economic indicators and pent-up buyer demand. But the housing market can maneuver around the juggernaut of subpar long-term economic fundamentals, based on the very real difference between this year and any other year post-crisis: Housing is now edging back to normal.
To read the full report, complete with data, charts and more commentary, visit http://www.redfin.com/research/reports/real-time-housing-market-tracker/2014/housing-market-tracker-june-2014.html.
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Redfin (www.redfin.com) is a customer-first real estate brokerage that represents people buying and selling homes. Founded and run by technologists, Redfin has a team of experienced, full-service real estate agents who are advocates, not salespeople, earning customer-satisfaction bonuses, not commissions. Redfin.com features all the broker-listed homes for sale, as well as for-sale-by-owner properties that don't pay brokers a commission. Redfin also offers online tools that make the entire process of buying or selling a home easier and more fun. The company serves major markets across the U.S. and has closed more than $13 billion in home sales. In 2012, Redfin was named one of The DIGITAL 100: World's Most Valuable Private Tech Companies by Business Insider.
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Rachel Musiker, 206-588-6863