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Homes Are Flying Off the Market
By Karen Weise on March 19, 2013
This is, many people will tell you, a “Big Week for Housing Data” as a deluge of new statistics come out about how housing markets fared in February. Amid the flood of figures, one overlooked data point is crucial in understanding the state of the market right now.
The housing site Redfin measures what it calls “selling velocity,” or how briskly homes are finding buyers. The faster homes go under contract, the higher the selling velocity. In the 19 major markets in February, more than a third of houses sold within two weeks of being listed. In California, the velocity is even higher. In San Jose, 63.1 percent of homes sell within two weeks; in San Francisco, 56.8 percent do. Further south, in Los Angeles, Ventura, the Inland Empire, and San Diego, about half of homes went under contract within two weeks. This is the housing equivalent of “flying off the shelves.”
Part of the frenzy comes from a lack of inventory. Buyers have returned to the market while sellers sit on the sidelines, and Redfin says inventory is down 32 percent from last year in those top markets. But there are forces that may increase inventory. Chief among them are rising prices. Bank of America estimates that prices will increase 8 percent this year, stimulating a “positive feedback loop” to help the market pick up even more. “Someone say house party?” the bank’s analysts wrote earlier this month.
Rising prices could coax more sellers, who have been waiting for prices to rebound more, into the market. It also helps underwater homeowners. Once borrowers are above water, they can sell homes without owing on their mortgages.
Also, construction is picking up: Homebuilders are building at a pace of about 917,000 homes a year, according to new data released on Tuesday. Builders say their biggest problems isn’t a lack of demand but bottlenecks in the supply chain, such as a lack of developed lots and higher labor costs. As they continue to build, it adds to the economy, which also can boost home sales.
If these pressures don’t increase supply quickly enough for the spring and summer home-buying seasons, selling may gain further velocity—and homes may move off the market even faster.
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.
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