California’s shrinking housing supply could soon be a boon for reverse mortgage originators in the state, as RMD reported Wednesday from the National Reverse Mortgage Lenders Association’s Western Meeting in Huntington Beach, Calif. But the Golden State isn’t the only place where demand outstrips available homes on the market — it’s true across the country.
According to recent data from CoreLogic, the nation’s housing supply stood at 4.1 months in December 2016, the tightest December for available homes since 2000. While the Irvine, Calif.-based research firm notes that the supply remained above the record low of 3.5 months in June 2000, the news tracks with recent stories about rising home prices in regions across the country: As RMD reported earlier this month, single-family home prices rose 7.1% in March, marking the 62nd consecutive month of gains.
Real estate website Redfin painted a similar picture for April 2017. Thanks to a dearth of available homes, Redfin’s Alina Ptaszynski wrote, sales were only 1.2% higher than at the same time in 2016, with a 13.3% drop in the number of homes on the market — the biggest fall-off in four years, according to Redfin.
This lack of supply has driven up home prices, with the median rising 6.2% to $280,000 in April according to Redfin’s data, and the average time spent on the market falling to just 40 days — the lowest number recorded since 2010, when Redfin began tracking the metric. The firm also put housing supply in April at a little over 3.0 months; by comparison, a balanced marketplace generally has about 6.0 months of supply.
The stats go on and on. CoreLogic tracks the ratio between median home price and median income, with a baseline of 1 — any number above 1 means that housing prices are growing faster than incomes. This metric has been rising since 2011, the only year in which it dipped below water, and now sits above 1.1.
“With tight supply, it becomes more difficult to bargain with the seller and multiple offers are more likely to happen,” CoreLogic’s post pointed out.
All of this has meaning in the Home Equity Conversion Mortgage world, as a buyers’ market means that older homeowners may be more inclined to stay put and remodel than downsize. In California, as RMD reported, unique property tax laws provide an additional reason for homeowners to eschew moving, which some in the state see as an opportunity to boost HECM originations.
In fact, CoreLogic named San Jose and San Francisco as the country’s hottest markets based on supply and average home price reductions. Seattle and Denver — both located in HECM hotspots — followed close behind.
Over at Redfin, chief economist Nela Richardson saw no reason for the housing market to wilt in the summer heat.
“When it comes to the housing market breaking records, I’m beginning to sound like a broken record,” Richardson said in the post. “The market tends to accelerate through June, so I wouldn’t be surprised if new records for speed and competition are reached in May and June given what we are seeing now.”
Written by Alex Spanko