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Home Value Forecast: Amount of Available Housing in U.S. on the Decline

The amount of housing inventory, or lack thereof, was the story of 2016. A look at recent housing data, as well as historic trends, shows the shortage in housing stock may continue throughout 2017.

At Home Value Forecast, we’ve written about it often — how the drop in housing starts post-crisis made inventory scarce, which as a result led to low Months of Remaining Inventory (MRI) and fierce competition for homes on the market.

Taking a look at statistics from December 2016, as well as a year ago, brings this phenomenon further into focus. The below chart lists the percentage of communities we track at different levels of inventory as reflected in Months of Remaining Inventory (MRI):

real-estate-market-trends-january-20171

As a refresher, Months of Remaining Inventory (MRI) is defined as the current number of active listings divided by the monthly sales rate. It combines both supply and demand into one number, giving a more holistic view of the state of the market. Traditionally, a balanced market would have an MRI of around 6 months.

Communities with an MRI under 3 have jumped from 12.7% to 20.63% in a year, a 62.44% increase. In December, 2014, this number was 9.17% — meaning there’s been a 125% increase in communities with a dramatic shortage of homes for sale in a two year period.

A closer look at the Dallas-Fort Worth, TX Metroplex further explains how this phenomenon could continue to impact homebuyers.

Lack of Inventory Impacting Market in Dallas–Fort Worth Metroplex

A pair of Texas CBSAs, Dallas and Fort Worth, both have MRIs below 3 as of December 2016, and both have seen major changes over the past year.

real-estate-market-trends-january-20172

When looking at Inventory by home size, the story for people looking for smaller properties (usually first-time buyers) in Dallas is even worse. MRI numbers for homes between 1,000 and 2,499 square feet in size are now between 1.08 and 1.44.

real-estate-market-trends-january-20173

This means fierce competition for homes, where buyers that are able to act fast and pose less risk to the seller have the advantage. These “favored” buyers would include those already pre-approved for a mortgage, those with larger cash down payments and those with no contingencies (like the sale of another home).

Price appreciation in Dallas and Fort Worth reflect the competition:

real-estate-market-trends-january-20174

real-estate-market-trends-january-20175

As interest rates continue to rise, industry experts are predicting a slowdown in price appreciation, especially for places like Dallas and Fort Worth. The Collateral Analytics Price Index Forecast used at Home Value Forecast reflects just that.

real-estate-market-trends-january-20176

CBSA Winners and Losers

Each month, Home Value Forecast uses a number of leading real estate market-based indicators to rank the single-family home markets in the top 200 CBSAs and highlight the strongest and weakest metros.

The ranking system is purely objective and is based on directional trends. Each indicator is given a score based on whether the trend is positive, negative or neutral for that series. For example, a declining trend in active listings would be positive, as will be an increasing trend in average price. A composite score for each CBSA is calculated by summing the directional scores of each of its indicators. From the universe of the top 200 CBSAs, each month we highlight the CBSAs which have the highest and lowest composite scores.

The tables below show the individual market indicators that are being used to rank the CBSAs, along with the most recent values and the percent changes. We have color-coded each of the indicators to help visualize whether it is moving in a positive (green) or negative (red) direction.

Top 10 CBSAs

real-estate-market-trends-january-20177

Dallas and Fort Worth both show up in our Top 10 list this month, boasting 55 and 53 Sold Days on Market, the lowest two in our Top 10.

All of the CBSAs included in the Top Ten show a drop in Active Listings – something to be expected this time of year. This number will increase as we roll into the spring buying season.

Bottom 10 CBSAs

real-estate-market-trends-january-20178

For the Bottom Ten, Active Listings are also down, except for four Texas metros (Killeen, McAllen, Midland and Longview), which have been impacted by the downturn in oil. Texas’ oil rig count is at 325, up from 301 last year. If the number of rigs in Texas continue to increase, the communities hardest hit could see some relief.

About Home Value Forecast

Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services. HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs.

HVF is built using numerous housing and economic data sources. The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a corporate subscription to the service.

Also, Pro Teck Valuation Services offers reporters the following:

  • National, regional or metro level housing data
  • Monthly updates and HVF insights articles
  • By-request data for your story — custom data, heat maps and charts are available
  • Expert commentary from Home Value Forecast Editorial Committee:
    • Tom O’Grady, Chief Executive Officer, Pro Teck Valuation Services
    • Michael Sklarz, PH.D., President, Collateral Analytics
    • Jeff Dickstein, Chief Compliance Officer, Pro Teck Valuation Services
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