NAR: Housing market shows 'resilience' in Q1 despite persistent lack of inventory

Dive Brief:

A National Association of Realtors 2016 first-quarter report found that in the majority of U.S. metros, U.S. home prices and sales saw growth, despite the fact that the market continued to battle low inventory.
The NAR reported the median price for an existing single-family home increased in 87% of the markets in the survey, with 154 out of 178 metros recording quarter-over-quarter gains on closed sales.
The NAR also found that the national median existing single-family home price rose 6.3% from a year ago to $217,600, while total existing-home sales edged up 1.7% to a seasonally adjusted annual rate of 5.29 million from last quarter and 4.8% from the same period last year.

Dive Insight:

NAR Chief Economist Lawrence Yun said that despite the increase in first-quarter sales in most markets — which was largely due to low mortgage rates and a healthy job market — sales were still constrained by low inventory and home price growth beyond wage increases. However, Yun added that the first-quarter's housing market showed "resilience" in the face of low supply, an uncertain stock market and meager economic growth and, in fact, had its "best first quarter of existing sales since 2007." Still, Yun said that the market needs increased inventory to "reach its full potential."

According to the NAR report, there were fewer available homes at the end of the first quarter of 2016 (1.98 million) versus the first quarter of 2015 (2.01 million), and the average supply was down to 4.3 months from 4.6 months a year ago. The NAR said the five most expensive housing markets in the first quarter were San Jose, CA, ($970,000); San Francisco, ($770,300); Honolulu, ($721,400); Anaheim-Santa Ana, CA, ($713,700) and San Diego ($554,300).

In response to calls to ramp up new home construction, some builders point to regulatory costs as the primary inhibitor. A recent study by the National Association of Home Builders that found that almost 25% of a home's selling price is comprised of government regulatory costs, such as impact fees, utility hookups, building permits and safety regulation implementation, as well as the overhead resulting from regulatory delays. The NAHB said that while the percentage of regulatory costs per home has not changed much in the last several years, home prices have shot up, resulting in a near-30% rise — from $65,000 in 2011 to $85,000 in 2016 — in the dollar amount of those costs. In comparison, wages have only increased slightly more than 14%.