Current Mid-Market Inventory Shortage May Be An Important Indicator

9 October 2019

Current Mid-Market Inventory Shortage May Be An Important Indicator

Inman News

A new realtor.com housing trends study released Tuesday reveals a seismic inventory shortage may be on the way.

The housing market is headed for another shortage, according to a realtor.com housing trends study released Tuesday.

Increased buyer demand spurred by historically low mortgage rates caused sizable drops in available inventory in starter homes priced under $200,000 and mid-market homes priced between $200,000 and $750,000. In September, the starter home market experienced a 10 percent year-over-year inventory decline, and inventory for mid-market homes was at a standstill  — ending 18 consecutive months of growth, according to the study.

“Buyers looking for their next home have faced the headwinds of tight inventory and a competitive market this year,” realtor.com Senior Economist George Raitu said in a prepared statement. “While lower mortgage rates and the arrival of fall promised a reprieve, conditions continue to tighten as demand remains strong.”

“September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020,” he added.

Raitu says buyers shopping within the starter home and mid-market range aren’t the only ones who should be concerned. As inventory tightens on those levels, some buyers may begin turning their sights to homes priced above $750,000.

If lower interest rates stick around, Raitu predicts the current upper-tier inventory levels will start to decline as soon as February 2020.

“The mid-tier of housing represents nearly 60 percent of homes for sale on the market, making it a solid indicator of how tight inventory levels are in the U.S,” Raitu said. “After more than a year and a half of solid growth in this segment, we’re seeing inventory levels stall out and flat-line. If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of homebuyers are going to feel its effects as their options rapidly dwindle.”

An impending inventory shortage means buyers must strike now, while home price growth stays at a moderate 4.3 percent year-over-year — a 3 percent slowdown from last September (7.3 percent).

Properties on realtor.com stayed on the market for an average of 65 days, a one day increase from last September and a two-day increase from August, signaling the end of a hot spring and summer buying season.