With a decrease of new and existing homes on the market, home prices are likely to see a sizable jump before the end of the year and into 2013, according to the National Association of Realtors.
In its latest survey, the NAR found that the median time a home was on the market was 69 days in July, a 29.6 percent decrease from 98 days one year earlier. At the July sales pace, there was 6.4-month supply of homes for sale, down 31.2 percent from July 2011′s 9.3-month supply.
“As inventory has tightened homes have been selling more quickly,” Lawrence Yun, NAR chief economist said in a press release. “A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market.”
During the past 24 years of the NAR’s Profile of Home Buyers and Sellers series, the average time for homes on the market has been 6.9 weeks with an average supply of 7.0 months. A balanced market is considered to be one with a 6 month supply.
During the peak of the housing boom, between 2004 and 2005, homes were on the market an average of 4.3 months, selling in about 4 weeks. When things turned sour, by 2009 homes were selling on average after 10 weeks and there was a 10.0-month supply.
Today’s numbers are definitely back in the range of a balanced market, and typically in such a market, home prices rise roughly 1 to 2 percent above the rate of inflation. Yet the NAR is forecasting a much steeper jump for the next little while.
“Our current forecast is for the median existing home price to rise 4.5 to 5 percent this year and about 5 percent in 2013, which is somewhat stronger than historic norms because of the inventory shortfall that is most pronounced in the low price ranges,” Yun said.
And as long as mortgage rates stay low and lending requirements do not get any tighter, rising home prices will hopefully help the mortgage market made noticeable improvement before the end of next year.