Housing is “Extremely Sensitive to the Jarring Macroeconomy”

SEATTLE—The housing market is going to get more competitive in 2016, according to locally based Redfin . Home sales grew 6.7% in January from last year, while depleted inventory pushed the median sale price up 7.7% to $255,300. Total inventory fell 5.6%, while the number of new listings inched up 0.5% year over year. “The economy is facing significant headwinds this year. Though housing is positioned for growth, it is also extremely sensitive to the jarring macroeconomy,” says Redfin’s chief economist Nela Richardson . “So far sales have been bulletproof to price increases, but this is unsustainable in a slowly growing economy unless inventory improves.” Demand has outpaced supply since early 2015, when inventory began to drop sharply in many metro areas and home sales rose even faster. In January, Redfin saw its home tour index, which measures the number of customers requesting tours, reach its highest level on record, while the number of customers making offers fell year over year for the first time since October of 2013. This means more buyers are searching, but fewer are having success finding the right home in their price range. High home prices and low mortgage rates in 2015 failed to entice enough homeowners to move up or list their homes to create the substantial growth in inventory needed to meet demand. In January, while a few markets saw big increases in inventory (Miami up 48.6% and Denver up 30.7%), other hot markets saw dramatic drops (Seattle down 39% and Portland down 37%). Where will the market go from here? Redfin foresees three potential outcomes in 2016: 1. Homeowners and builders bring more balance to the market. Many more homeowners would need to decide to move up or otherwise list their homes, and builders would need to bring a million-and-a-half more new homes on the market than they did last year. 2. More competition, more price growth, stagnant sales. Bidding wars become even more prevalent when demand remains strong and supply is choked by lack of new listings and not enough new construction. Prices increase by double-digit rates in many regions, and home sales hover near 2015 levels. 3. Buyers retreat, prices peak. Low inventory, high prices and competition in many areas squeeze buyers out of the market. Growth in home sales stalls, prices peak and the top of this housing cycle is realized.