Toward a 'new normal'.

Author:Sichelman, Lew

THE HOUSING MARKET IS TRENDING TOWARD A "NEW NORMAL" characterized by fewer houses for sale, according to two economists who spoke at the Washington, D.C.-based Financial Services Roundtable's Housing Policy Council's two-panel discussion about the housing market and policy issues held in Washington in early April.

"A number of forces are at work" to keep the inventory of for-sale houses "extremely lean," said FRANK NOTHAFT, chief economist at Irvine, California-based CoreLogic, a co-sponsor of the half-day event.

Among those forces: "People are in that part of their life cycles where they are not inclined" to sell, he said.

NELA RICHARDSON, chief economist at Seattle-based real estate brokerage Redfin, told of a two-bedroom house in Washington, D.C., that fetched 17 offers and sold for $100,000 over the list price.

"Demand is strong" practically everywhere, but "there is little inventory," she said.

Grand Rapids, Michigan, now has a three-month supply of houses on the market versus 13 months a year ago, she pointed out, while Seattle has just 1.4 months' supply--the lowest of any major metro area in the land.

Another sign of market tightness: This is a "really fast market," Richardson said. Houses are selling five days quicker this year than last, with a quarter of all houses going under contract within two weeks.

With new construction still below what's needed to satisfy demand, Richardson said the market now "is really dependent on homeowners for supply." But many are reluctant to list their homes because they won't be able to find another place, at least not as quickly as their present

homes are likely to sell, she added.


"People are hesitant to list because their homes will sell in five days and it may take months to find a new home," the economist said. "The only people willing to sell are those who don't intend to buy" another home. According to Redfin surveys, 45 percent of potential sellers are worried they won't be able to find a replacement home.

Buyers who need financing are still competing with those who intend to pay all-cash. But in another part of the new normal, rather than contending with investors, they are fighting over listings with intended owner-occupants who don't need a mortgage, according to Richardson.

"The balance has shifted" to all-cash buyers, she said.

Nothaft, the former chief economist at Freddie Mac, said that home-equity lending has "more than doubled" in the last three years and "will continue to increase" going forward. "There are 60 million owners with at least 25 percent equity in their homes and the ability to tap into that equity for money," he said.

Meanwhile, the new deputy chief economist at Freddie Mac, LEN KIEFER, told participants in the Washington, D.C-based National Association of Home Builders (NAHB) semiannual Construction Forecast Webinar in mid-April that "demographic tailwinds" will drive the housing market in 2016.

"This year will be the best year for housing in a decade," he ventured.

Prices in a third of the nation's 131 metropolitan areas are already back above their pre-recession peak, Kiefer reported. Nationally...

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