Low demand for homes creating excess supply in some markets
Not every housing market is dealing with an inventory shortage, as over one-third of respondents said there was excess supply in their local area, according to a First American Financial survey.
"When asked to identify the top reason for the availability of supply in their markets, 47.5% of the survey respondents indicated the lack of first-time home buyer demand as the main reason for the availability of inventory," said First American's Chief Economist Mark Fleming. "Most of the survey respondents that cited lack of first-time home buyer demand as the reason for the availability of inventory were based in Connecticut, Louisiana, West Virginia and Florida."
"The second-most cited reason for the availability of inventory was more new homes built recently than the market needs (23.3%), followed by bank-owned properties for sale (14.8%) and rental investment properties for sale either to new investors or homeowners (14.4%)."
Most of the title agents and real estate professionals surveyed by First American that said their area had an excess supply, 47.5%, called the amount moderate, with 8% saying it was severe. Another 28% said the amount was low, while 16% said it was negligible.
The overall attitude about growth in the number of mortgage transactions going forward for both purchase and refinance declined during the third quarter.
First American's Real Estate Sentiment Index was at 54.70 for the third quarter, down 4.8% from the second quarter's 57.47 and 9.7% from the third quarter of 2016.
Even though purchase volume sentiment was down 5.6% from the first quarter to 61.24, "strong millennial demand continues to keep expectations for purchase volume growth positive overall, while expectations for a rate increase in September [by the Federal Open Market Committee] may be causing refinance expectations to fall," said Fleming.
Compared with a year ago, purchase sentiment was up 0.2%.
The refinance component of the index was down 3.8% from the second quarter to 48.16 and down 19.7% from the third quarter 2016.