Realtor.com chief economist Jonathan Smoke says the housing market is going strong, and will stay that way for the rest of the year. However, he warns that the market won’t be without challenges, as economic uncertainty and the lack of housing inventory linger in the background.
In his latest report, Smoke reveals that homes sales for this year through September increased by four percent compared to the same period in 2015. Existing home sales were up three percent, while new home sales rocketed by 13 percent.
“The new-home market is gaining momentum as the existing-home market struggles with very low levels of inventory,” Smoke said. “As a result, new homes represent 10 percent of home sales now; a year ago, they represented only 8 percent.”
The persistence of low inventories in many markets has created stronger than normal home price appreciation, Smoke said. In the last year, median prices for existing homes rose by six percent.
“The housing market outperformed the U.S. economy in the first half of the year, as growth in sales and prices was stronger than the growth in GDP,” Smoke said. “Housing outperformed because of ample demand from buyers who haven’t yet been successful — buyers who just happen to be from the two largest generations in American history.”
Smoke was alluding to how both baby boomers and millennials are reaching turning points in their lives – the former are getting married and forming new households, while baby boomers are retiring and in many cases, downsizing or moving. Currently, millennials aged 25 to 34 represent the largest demographic of home buyers, according to the National Association of Realtor’s 2016 Profile of Home Buyers and Sellers report.
“A stronger consumer outlook on top of historically high numbers of people turning 30 as well as 65 will provide the support for continued gains in the months ahead,” Smoke said. “The key challenges will be continuing low levels of available homes for sale combined with navigating marginally higher mortgage rates.”