From the WSJ:
The U.S. housing market has a supply issue.
Between low interest rates, a steady job market and rising rents, economic fundamentals suggest lots of houses should be selling. Simultaneously, though, tight inventory levels are playing a role in driving prices higher, making the market less appealing for buyers and potentially making it tougher for sales to keep growing at a rapid clip.
As the all-important spring selling season ramps into high gear, Monday’s report on existing-home sales should offer clues of whether higher prices are keeping potential buyers on the sidelines.
Economists polled by The Wall Street Journal estimate February sales of previously owned homes fell 2.6% from a month earlier. On a year-over-year basis, sales are expected to have risen by about 7%. Existing homes account for about 90% of the housing market.
In 2015, existing-home sales had their best year since 2006. But falling inventory could make it difficult for last year’s strength to continue.
For instance, there were about 1.8 million existing homes available for sale at the end of January, according to the National Association of Realtors. That was down 2.2% from a year earlier. It also represented about a four-month level of supply at the current sales pace, near the lowest levels since 2005. A level of six months is considered typical.
Of course, the existing-home market isn’t completely dried up. As the Journal reported earlier this month, housing has become a tale of two markets, as lower-priced homes have been selling rapidly while inventory of more expensive ones is piling up. In other words, the cheaper the price, the smaller the growth in the number of homes available on the market.