NEW YORK – Dec. 21, 2012 – Shrinking inventories of homes for sale, which have helped drive prices higher this year, may reverse course next year, economists say.
Rising prices are likely to persuade more people to sell and builders to add more homes, which would expand supplies.
In recent years, with prices nationally down more than 30 percent from their 2006 peaks, the only people selling were people who had to sell, says economist Paul Diggle at Capital Economics. But prices have been rising, up 6.3 percent in October compared with a year earlier, CoreLogic says. More increases are likely next year.
Supplies of homes for sale are “close to a low point now,” Diggle says and will “probably turn around over the next year.”
That will help keep a check on prices. Still, Capital Economics predicts prices will rise 5 percent next year. Economists surveyed by market watcher Zillow foresee a 3.1 percent jump.
The housing market continued to show signs of strengthening in November, with existing home sales climbing to its highest level in three years, the National Association of Realtors reported Thursday.
Total sales of existing homes rose 5.9 percent in November to a seasonally adjusted annual rate of 5.04 million, up 14.5 percent from a year ago, NAR said.
Yet, the most important number in the monthly report dealt with the supply of homes for sale, says economist Patrick Newport of IHS Global Insight. Supplies have fallen to the lowest in more than seven years, based on the current pace of sales. NAR reported the supply fell to 4.8 months in November, down 38 percent from January 2011. Realtors consider a six-month supply to be a balanced market between buyers and sellers.
More people will likely step up to sell next year, assuming prices continue to rise, Newport says. “A lot of people have just been waiting.”
Phoenix, which leads the nation with a 25 percent rise in October prices year-over-year, saw its supply of active listings hit a low in June, then expand until December. That’s a normal seasonal pattern for Phoenix, but more ordinary sellers are also likely tapping into rising prices, says Mike Orr, real estate expert at Arizona State University.
A recent survey also points to more sellers. Fannie Mae’s November National Housing Survey showed the share of consumers who say now is a good time to sell a home jumped 5 percentage points in November to 23 percent. That’s the highest level since the survey began in June 2010.
Real estate website Trulia, with Harris Interactive, also recently surveyed homeowners and found that 22 percent of current homeowners said they’re at least somewhat likely to sell their homes next year.
Those most likely to sell are people who bought after 2009 and have seen prices rise, the survey showed. They will likely include “flippers” who buy distressed homes, fix them, then resell, says Trulia economist Jed Kolko.
Supplies of homes for sale have been tightening, given stronger sales and a reluctance among people to sell while prices were weak. Also, fewer distressed properties have been coming to market as the foreclosure crisis slowly abates.
© Copyright 2012 USA TODAY, a division of Gannett Co. Inc., Julie Schmit