The housing market looks bad — except to these folks
Americans overall are feeling worse about the housing market — unless, of course, you’re trying to sell your home.
Fannie Mae’s index measuring housing sentiment decreased by 1.2 points to 65.6 in May. Four of the six surveyed components slipped month over month, with the component gauging whether now is a "good time to buy" again nearing a survey low.
Sellers, though, are feeling better.
The "good time to sell" component increased in May to its highest level since last July. Additionally, for the second consecutive month, a greater share of consumers indicated that they expect home prices to increase over the next year — an outcome sellers prefer.
The contradictory perspectives reflect a market with meager inventory, where buyers continue to outnumber listings and the sellers who remain are getting multiple offers on their properties.
"If the US housing market had more housing supply, we would have a more balanced market," National Association of Realtors Chief Economist Jessica Lautz wrote to Yahoo Finance. "Today, there is limited housing supply, especially at affordable price points."
Market reality
Low inventory has knocked the market sentiment out of whack.
Although 80% of surveyed Americans said now is a bad time to buy a home, 65% of them still believe the market is good for selling.
"Not all buying interests are being completed due to limited inventory," NAR Chief Economist Lawrence Yun wrote in a press release in May after April contract signings remained unchanged from March, during what is typically the busiest season for buying.
Closed sales also dipped 3.4% month over month in April.
"And here there's the real kicker," Apollo Global Management Chief Economist Torsten Slok previously told Yahoo Finance. "The number of offers for properties sold is up."
The persistent low inventory has been a boon to sellers still in the market. The average number of offers received per sold property increased to more than 3.1 in April, compared with 2.4 in October, according to the latest data provided by Apollo Global Management. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
"Multiple bids are common from first-time buyers, move-up buyers, and all-cash buyers — with all-cash buyers typically winning," Lautz said. "When sellers have multiple bids, negotiating is often sidelined."
Builders are also more confident
The other sellers enjoying the market conditions? Homebuilders.
Confidence among builders improved for the fifth month in a row in May, hitting the highest level in 10 months, the National Association of Home Builders found. A big reason for that is the limited inventory on the resale side.
"There is less than a three months supply of resale inventory, meaning new construction is more critical for the market." NAHB Chief Economist Robert Dietz wrote to Yahoo Finance. "Typically, new construction is 10% to 15% of inventory on the market. Currently, it is about a third of the total homes for sale."
That’s translated into increases in new home sales and rosier outlooks from homebuilders after unexpectedly good first quarters. Some builders, as well as experts, also noted that previously skittish buyers are finally coming to terms with the volatile nature of mortgage rates, which last week approached 7%.
"Buyers do seem to understand the see-saw impact of interest rates and competition,” Lautz said. “As rates increase, qualified buyers stand a better chance of landing their dream home as competition eases. As rates decline, the home price may end up being well over the listed price as more buyers join the market."
The latter scenario is good for sellers. Not so much for buyers.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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