Buyers in the tightest US housing markets finally got what they’ve been looking for: inventory.
But instead of sales surging as a result, they’re sinking.
In Salt Lake City, where listings jumped 53 per cent in March from a year earlier, transactions fell 21 per cent, the biggest drop in the country, according to a report from brokerage Redfin. Utah’s capital was followed by Los Angeles, Las Vegas and Orange County, California, all previously hot markets where inventory has been rising.
Blame affordability. Buyers - especially in urban areas in the western US - stepped back last year after a jump in mortgage rates made it more expensive to purchase homes that were already costly. Persident Donald Trump’s tax plan, which punished pricey areas, added to the slowdown. But there’s hope that lower borrowing costs this year may already be helping.
“Buyers are back, but they’re picky,” said Daryl Fairweather, chief economist of Redfin. “In order to get back to a balanced market, prices have to come down more.”
Nationally, purchases of previously owned homes dropped 4.9 per cent in March from the previous month, the National Association of Realtors said Monday. The group projects sales to rise later this year.
Demand in markets such as Orange County went from “good to horrible” in late 2018, said Rick Palacios, director of research at John Burns Real Estate Consulting, which tracks home construction. In the fourth quarter, sales of new homes in the area were the weakest since the Great Recession, he said.
Recently, buyers have started to return.
“We’re starting to hear that sales are picking up in Orange County and the Pacific Northwest,” Mr Palacios said.
“The caveat is that builders are having to cut prices and meet the market to generate those sales. They need another month or two of steady sales momentum before they feel comfortable raising prices again.”