Conflicting Information on Housing Recovery, What's the Truth?
Recently there has been conflicting information reported on whether the housing market is recovering or not. While home sales dropped 5.1% in January 2014, hitting their lowest levels since August 2013, according to the National Association of Realtors (NAR), the average price of homes sold increased by 13.8 percent over the last year. Why would the number of sales be down but prices be up?
Sales were down for three reasons. First as prices have rebounded and interest rates increased affordability has decreased. Widespread inclement weather over the winter kept many buyers from looking. Lastly, fewer homes sold because there are fewer homes for sale. The number of homes for sale in Omaha is 7.4% lower now than one year ago.
Prices on the other hand are up because the inventory of homes for sale is low. It is simple supply and demand. With less supply, prices rise as buyers have fewer homes to choose from.
Another factor boosting the average sales price is the decrease in distressed sales. REO (bank owned properties) sales have decreased by 16% since this time last year. Short sales are down by 44% over the same time period. In Omaha, REO sales, which never made up a significant portion of the market, dropped from 5.8% to 4.5% based on information available from the Great Plains Multiple Listing Service (GPMLS). No information is available in the change in the number of local short sales since GPMLS does not track this information.
While some of the information sounds contradictory, the national and local real estate markets are recovering. The challenges facing buyers are decreasing affordability and fewer homes from which to select.