SCHNECKSVILLE — A dwindling supply of available homes has been a constant thorn in the side of the Lehigh Valley’s housing market throughout 2016.
And, according to one of the nation’s leading housing economists, local real estate professionals shouldn’t expect that to change much next year.
“Given the home building activity so far — and it takes some time to actually build a home — what is in the pipeline is insufficient, so there will be a housing shortage going in to 2017,” said Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors. “Right now, as we enter the winter months, things will appear soft but this is normal seasonal activity.
“But come spring time, I think you will have a very tight inventory condition.”
Yun delivered the keynote presentation during the Greater Lehigh Valley Realtors Association’s annual Economic Outlook, an event held Thursday at Lehigh Carbon Community College that also included a live taping of “Business Matters” and a panel discussion that included Don Cunningham, president and CEO of the Lehigh Valley Economic Development Corp., and Becky Bradley, executive director of the Lehigh Valley Planning Commission. Yun discussed everything from national economic trends, such as sluggish gross domestic product growth, to local trends, such as an average hourly wage rate that is trending downward, each time tying it back to its impact on the housing market.
In the Lehigh Valley’s housing market, some would say supply is already tight, as inventory has declined every month this year in the Lehigh Valley. In August, there were 2,807 homes on the market, a 40 percent decrease from 4,702 a year earlier, according to data from the local Realtors group.
And, of the 1,300 residential units approved in 2015, apartments made up 43.8 percent — or 570 units — while single-family homes were a distant second, at 18.9 percent, or 246 units, according to the annual Build LV development report by the Lehigh Valley Planning Commission. The 246 single-family units approved last year were only 11 percent of the number at the pre-Recession peak of 2,249 in 2004, the report shows.
Baby boomers are driving the local residential development, with age-restricted housing accounting for nearly 60 percent of all new residential units last year.
“We do need product that’s available to all age ranges,” Bradley said, noting there’s a real shortage of housing in the $250,000 to $425,000 range.
The shortage comes at a time when demand is strong — through August, closed sales are up 7 percent locally — as buyers look to capitalize on historically low interest rates. On Thursday, Freddie Mac said a 30-year fixed-rate mortgage averaged 3.42 percent, down from 3.85 percent a year ago.
That’s led local mortgage bankers, like Michael Bower, to notice a trend when borrowers sit down at the table. They say, Bower said, “It’s impossible to find a house and, when we finally did, there were multiple offers.”
With that, prices have started to rise. The median sales price for a Lehigh Valley home sold in August was $195,000, a 6 percent increase from $183,950 a year earlier. Year to date, however, the median sales price has increased more marginally, jumping 1.7 percent to $178,000.
But prices could increase more rapidly in 2017.
“With the low inventory condition, it’s just inevitable that prices will be rising,” Yun said. “Prices always lag behind sales. So sales have been strong, inventory down dramatically and therefore prices will inevitably rise going into 2017.”
With more instances of multiple offers, sellers received 97.5 percent of their list price in August, up from 96.9 percent a year ago. Still, Lehigh Valley homes remain affordable, and the local median sales prices lags the national figure of $240,200 in August.
And, even with tight inventory, the Lehigh Valley is no Seattle or Denver, identified earlier this month by the National Association of Realtors as two of the top-10 markets across the country in “dire need of more single-family housing starts.”
But the Lehigh Valley will need to replenish its housing supply, said Yun, who expects continued future migration to the Lehigh Valley from people now living in New Jersey, New York and Connecticut. In addition, potential sellers may be hesitating to list their homes because of a concern over whether they’d be able to find another home in the current market.
“I think [local Realtors] are seeing a good market condition in terms of buyer activity but inventory shortage — that is the one consistent story that is holding back the recovery potential,” Yun said.