The Housing Market Paradox: Rising Prices Amidst Increasing Inventory

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The Housing Market Paradox: Rising Prices Amidst Increasing Inventory

In today’s housing market, we’re witnessing a peculiar phenomenon that defies basic economic principles. Despite reports of increasing inventory, home prices continue to climb. This scenario challenges the fundamental law of supply and demand, leaving many industry professionals and potential home-buyers puzzled.

Recent Data from the National Association of Realtors (NAR)

The latest NAR report reveals some intriguing statistics:

• Existing-home sales decreased by 0.7% in May, reaching a seasonally adjusted annual rate of 4.11 million.
• Year-over-year sales declined by 2.8%.
• The median existing-home sales price surged to $419,300, marking a 5.8% increase from May 2023.
• This represents the highest price ever recorded and the eleventh consecutive month of year-over-year price gains.
• The inventory of unsold existing homes grew by 6.7% from the previous month to 1.28 million at the end of May.
• This equates to a 3.7 months’ supply at the current monthly sales pace.

The Affordability Crisis

The combination of high prices and elevated interest rates has made home-ownership increasingly unattainable for many Americans. In fact, it’s estimated that 99% of Americans cannot afford to buy a home in the current market conditions. This raises serious questions about the sustainability of the housing market and the role of elected officials in addressing this crisis.

The Rental Market’s Impact

In 2023, we observed a significant shift towards renting among potential home-buyers. Many of these individuals signed 12-month leases, which are now coming to an end. This timing could potentially lead to a new wave of home-buyers entering the market.

The Importance of Non-QM Loans

One often overlooked solution to the affordability crisis is the use of non-QM (non-qualified mortgage) loans. These alternative lending options can help potential buyers who may not qualify for traditional mortgages. Loan officers who are well-versed in non-QM products can often find solutions for clients who were previously deemed “unclosable” by other lenders.

The Flip Side: Opportunities for Investors

Interestingly, the current market conditions have created opportunities for home flippers. According to ATTOM Data Solutions, home flipper profits have increased for the third time in four quarters, with an average profit margin of 30.2%. The typical flipper is netting an impressive $72,357 per flip.

This presents a significant opportunity for real estate professionals to work with investors, particularly those interested in flipping properties. Realtors and loan officers should consider reaching out to potential investors and exploring expired listings as potential flip opportunities.

Conclusion

The current housing market presents both challenges and opportunities. While affordability remains a significant hurdle for many potential home-buyers, alternative lending options and investment strategies could help address some of these issues. As industry professionals, it’s crucial to stay informed about these trends and explore innovative solutions to navigate this complex market landscape.