The time it takes to sell a home currently – 69 days in July, down 29.6 percent from 98 days in July 2011 – is in the range of historic norms for a balanced market, according to NAR. It’s also well below the cyclical peak reached in 2009.
The median reflects a wide spectrum; one-third of homes purchased in July were on the market for less than a month, while one in five was on the market for at least six months.
“As inventory has tightened, homes have been selling more quickly,” says Lawrence Yun, NAR chief economist. “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.”
At the end July, there was a 6.4-month supply of homes on the market at the current sales pace, which is 31.2 percent below a year ago when there was a 9.3-month supply.
NAR says that its research has determined that a balanced market generally has a median selling time of slightly more than six weeks, making the current market appear balanced.
In balanced market conditions, home prices generally rise 1 to 2 percentage points above the overall rate of inflation as measured by the Consumer Price Index.
“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 most pronounced in the low price ranges,” Yun says.
Inflation (CPI growth) is projected at 2.1 percent for 2012 and 2.3 percent next year.
From 1987 through 2011, analysis of the NAR Profile of Home Buyers and Sellers series showed the typical time on market was 6.9 weeks, while the existing-home sales series showed an average supply of 7.0 months – just above the high end for a balanced market.
NAR’s new measure of days on market shows a longer selling time than earlier findings that measured traditional sellers of non-distressed homes. The new series includes short sales that typically took three months or longer to sell.
“Factoring out short sales, the median time on market for traditional sellers appears to be in the balanced range of six to seven weeks,” Yun says.
During the peak of the housing boom in 2004 and 2005, when inventory supplies were historically low at an average 4.3 months, the median selling time was 4 weeks. Prices in that time rose at an annual rate of 10.3 percent.
In the economic downturn, time on market for non-distressed sellers peaked at 10 weeks in 2009 with a 10-month annualized supply. The median price fell 12.9 percent that year, the biggest annual decline on record.
“Ironically, if housing construction doesn’t pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above average appreciation,” Yun says. “Therefore, any unnecessary hindrance to housing starts, such as excessive local zoning regulations or stringent bank capital rules for construction loans, should be carefully re-examined.”
NAR’s new days-on-market figures will be included in future existing-home sales releases. It’s derived from a monthly survey for the Realtors Confidence Index.
The median time on market can be misleading at times, however. If an abundance of fresh listings enters the market, it could skew the average downward.
© 2012 Florida Realtors®