Still hope for break-out in home sales should inventory improve
An improved economy, a healthy labor market and the large population of millennials should have accelerated home sales much higher, but all hope for more transactions this year is not yet lost, according to the National Association of Realtors.
"As long as economic conditions maintain current levels, there's still a chance for sales to break out this year," Lawrence Yun, NAR chief economist, said in a press release. "However, with mortgage rates trending higher, it will only happen if supply levels improve enough to cool the speedy price growth in a majority of the country."
Limited housing inventory is creating affordability challenges for homebuyers as high demand and low supply levels continue pushing property values upward.
Single-family home prices increased in 90% of measured markets, with 161 of 178 metropolitan statistical areas seeing home price gains, according to the NAR's Metropolitan Median Area Prices and Affordability report. While the share of metro areas experiencing double-digit increases fell considerably from 30% last quarter, 13% still did post these high levels of growth.
"The unaffordable conditions in many of the largest metro areas — especially in the West — continues to be a growing concern for many middle-class households aspiring to buy a home," said Yun.
"Homebuilders, facing higher costs and labor shortages, are simply not producing enough affordable homes to satisfy demand. Local governments need to acknowledge this glaring issue and ease some of the zoning laws, permitting processes and regulations that are slowing construction," he continued.
The most expensive housing markets of the second quarter include several metro areas in California, including San Jose and San Francisco.