Housing Market Update: The River Is Running Dry and Buyers Are Parched

The results for March are in, and they’re only so-so. As buyers and sellers prepared for spring, this week we learned that home sales barely budged last month and builders weren’t particularly upbeat.

Sales of single-family homes, townhouses, condos and co-ops rose a modest 1.5 percent in March from a year ago, the National Association of Realtors said today. Buyers had fewer properties to chose from, with the number of existing (not new) homes for sale down 1.5 percent from a year ago.

It was the third discouraging housing report this week. On Monday, home builders said business was fine, even though they didn’t see a ton of traffic from buyers last month. A measure of industry optimism, the National Association of Home Builders/Wells Fargo Housing Market Index, held steady in March for the third-straight month.

“Cautiously optimistic,” is how NAHB chief economist Robert Dietz described the mood.

Cautious might be the operative word. Yesterday we learned that builders broke ground on disappointingly few single-family homes in March. Starts on single-family homes fell 9.2 percent from this time last year, the Census Bureau reported.

What’s going on?

One theme running through this week’s data is the shortage of homes for sale. Builders can’t find workers or empty lots. Homeowners are reluctant to put their houses on the market. As a result, inventory has been retreating for 14 straight months, leaving buyers in a bind.
“Tepid sales growth is to be expected given the sorry state of inventory,” Redfin chief economist Nela Richardson said. “And with rates at their lowest in almost two years, each new wave of listings leads to a new crop of buyers and fiercer competition.”

The upshot

The economy is always difficult to measure, and winter data on housing seems to be even more erratic since the recession, said Scott Brown, chief economist at Raymond James & Associates.
In the bigger picture, residential real estate is plodding along. And this week’s economic data makes it even less likely the Federal Reserve will raise rates at their meeting later this month.
“The figures are consistent with moderate growth – not strong, but not horrible – leaving the Fed in no hurry to take the punch bowl away,” Brown said.