[BOSTON] The US housing market, entering its busiest season, is tipped so far in favour of sellers that almost a third of listings in areas from Washington, DC to Denver and Seattle are under contract in two weeks or less.
One home in Washington attracted 168 offers in December and sold for almost twice the asking price. About 70 people lined up last month for a lottery to select buyers for four available houses in a San Ramon, California subdivision where, in August, bidders camped for weeks to secure purchases.
A plunge in US home listings to a 12-year low is driving up prices and preventing transactions from returning to historically normal levels. Many potential sellers are holding off until values rise more, while investors are snatching up distressed properties before they reach the market.
Builders, reporting their best orders in years, can't increase production fast enough. As buyers seek to take advantage of record-low mortgage rates, the supply and demand imbalance threatens to further limit deals as the key spring selling season approaches.
"There is just no inventory for buyers," said Bob Cilk, an agent with Re/Max Accord in Pleasanton, California, where only 27 single-family houses are available for sale, about a third of the normal level. "There are lots of losers in the marketplace now. When you have multiple offers, there are several losers and only one winner for each home."
US home prices rose 8.3 per cent in December from a year earlier, the biggest jump since May 2006, Irvine, California-based CoreLogic Inc reported on Tuesday. Existing home sales fell one per cent to a 4.94 million annual rate in December as tight supply put a lid on deals, according to the National Association of Realtors. A normal level is five million to 5.5 million transactions, said Walter Molony, a spokesman for the group in Washington.
While rising values eventually compel would-be sellers to list their homes, inventories may remain tight for a year or two because prices need to rise another 5 or 10 per cent before enough sellers can cover mortgage and transaction costs, said Mark Zandi, chief economist for Moody's Analytics Inc in West Chester, Pennsylvania.
"Nobody wants to sell at the bottom and everybody wants to buy at the bottom," said Paul Diggle, property economist for Capital Economics Ltd in London. "That might create some kind of standoff until home prices rise sufficiently so that sellers come back to the market at a larger scale."
About a third of homeowners say their biggest concern about selling now is that they will miss out on future price gains, according to a January survey by Redfin, a Seattle-based brokerage. That surpassed the economy as the top worry.
New listings in 21 of the largest US cities plunged 21 per cent last month from a year earlier, led by declines of more than 35 per cent in the San Francisco Bay area, Las Vegas and Atlanta, Redfin said. At the end of 2012, about 28 per cent of home listings nationally went under contract within 14 days, with cities in California's Silicon Valley and Los Angeles areas exceeding 40 per cent. In Washington, Seattle and Denver it was more than 30 per cent.
While more homeowners usually list properties after the start of the year, the buyer and seller logjam probably will continue into the spring as the appetite for real estate increases, said Jed Kolko, chief economist of San Francisco-based Trulia Inc, which operates an online property-listing service. "Inventories start growing in February and peak in July, but without even more new construction and more homeowners willing to sell, inventory will stay tight through this housing season."
For homebuilders, the spring selling season is traditionally viewed as starting the weekend after the National Football League's Super Bowl. The companies can't increase production fast enough because of labour shortages and rising competition for lots in the best locations, said Brad Hunter, chief economist of Metrostudy, a Washington-based research firm that tracks construction.
"They're barely keeping up with the demand and their backlogs are growing," Mr Hunter said. "And that emboldens them to raise prices." - Bloomberg