New data has become available indicating the typical amount of time it takes to sell a home has been shrinking. For traditional (non-distressed sellers) days on market is now in the range of historic norms for a balanced market, and well below the cyclical peak reached in 2009. The median time a home was listed for sale on the market was 69-days in July 2012, down 29.6% from a high of 98-days recorded in July of 2011. The median reflects a wide spectrum; one-third of homes purchased in July were on the market for less than a month, while one in five was on the market for at least six months.
Economists agree there is a clear relationship between inventory supply and time on market. As inventory has tightened homes have been selling more quickly. A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market.
At the end July there was a 6.4-month supply of homes on the market at the current sales pace, which is 31.2% below a year ago when there was a 9.3-month supply. There are consistent and related findings that show current market conditions are comparable with median selling time in balanced markets. Historically, in periods where existing-home sales averaged a 6-month supply, which is near the low end for market equilibrium, median days on market were reported to be between 6-8 weeks.
In such balanced market conditions, home prices generally rise 1 to 2 percentage points above the overall rate of inflation as measured by the Consumer Price Index. Current forecasts is for the median existing home price to rise 4.5% to 5% this year and about 5% in 2013, which is somewhat stronger than historic norms because of the inventory shortfall that is most pronounced in the low price ranges.
From 1987 through 2011, analysis showed the typical time on market was 6.9-weeks, while the existing-home sales showed an average supply of 7.0 months, just above the high end for a balanced market. The new measure of days on market shows a longer selling time than the historic findings which measured traditional sellers of non-distressed homes. The new data includes short sales that typically took three months or longer to sell. Factoring out short sales, the median time on market for traditional sellers appears to be in the balanced range of six to eight.
During the peak of the housing boom in 2004 and 2005 when inventory supplies were historically low, averaging 4.3 months over the two-year peak period, the median selling time was 4-weeks. Prices in that time frame were bid up and rose at an annual rate of 10.3%, historically higher than the 3.1 percent average. In the economic downturn, time on market for non-distressed sellers peaked at 10-weeks in 2009 with a 10-month annualized supply. The median price fell 12.9% that year, which was the biggest annual decline on record.
Economists predict if housing construction does not pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above average appreciation. Therefore, any unnecessary hindrance to housing starts, such as excessive local zoning regulations or stringent bank capital rules for construction loans, should be carefully re-examined.
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Original article was written by John Marcello and can be found here: Homes Selling More Quickly As Time On Market Falls