#The fall real estate market is often a busy time of year for Realtors. Sales typically pick up after Labor Day, making October the month with the second-highest volume of closings (after March).
#Nationwide, homes are selling in about 34 days on average, according to the National Association of Realtors (NAR) — except in Seattle. The median market time for a Seattle-area home has dropped to just nine days, the shortest time on record.
#The volume of home sales has increased 14.5 percent over last year, evidence of our improving real estate market. At the same time, the inventory of listings is down 23.3 percent from one year ago, according to the Northwest Multiple Listing Service (NWMLS). The imbalance of demand over supply has led to a record-low inventory of homes.
#For the fifth month this year, sales system-wide outpaced the number of new listings added to the inventory. That new-listing total for the 23 counties in the MLS service area was the lowest level since February. At the end of August, NWMLS members reported 20,749 total active listings in its database. That reflects a slight drop from July’s total selection of 21,069, but a 23.3-percent decline from the year-ago inventory, when there were 27,060 homes for sale.
#The shortage of homes listed for sale is the biggest challenge in the Seattle housing market. A seller’s market has reigned for 37 months, according to NAR. A normal market has at least a six-month supply of homes; a seller’s market occurs when there is less than a six-month supply of homes listed for sale. In Seattle, the supply is less than 30 days.
#In King County, the volume of completed sales in August was up 12 percent from the same time last year. The median sale price for single-family homes jumped 14.4 percent from one year ago. (The median sale price in King County for condos surged 17 percent from one year ago.)
Fewer homesellers
#There are several possible explanations for the tight housing market, including the number of homeowners who are stuck in their homes because they are underwater on their mortgages. There is also a sizable (but declining) number of homes held off the market due to the foreclosure process. Then there is lack of new construction during the Great Recession. Plus, a number of single-family homes have migrated into the rental housing pool.
But there is one additional reason not often discussed that helps explain the lack of inventory: There is an ongoing generational shift among American households that is slowing sales over the last several years and is likely to continue over the next two decades.
#According to the Harvard Joint Center for Housing Studies, members of Generation X, now ages 30 to 40, are a smaller demographic group than the baby boom generation, now in their 50s and 60s. For example, among the 35-to 39-year-old age group, the population in 2013 had 10.4 percent fewer households than their predecessors. Basically, the baby boomers are being replaced by the smaller Gen-X generation, resulting in fewer middle-aged adults.
#In addition, the U.S. homeownership rate has taken a dive. Homeownership has dropped to levels not seen in 20 years. The sharpest drop in homeownership occurred among those 35 to 44 years of age. Although much media attention is given to the low rate of homeownership among millennials, homeownership rates among Gen-Xers is actually furthest below the 20-year historical rates of similarly aged adults.
#So the combination of a smaller population of 30-to 40-year-olds and a sharp drop in the rate of homeownership results in a significant decline in the number of households in this age group.
#Historically, middle-aged adults ages 35 to 44 make up the majority of trade-up buyers. Fewer current homeowners in this key age group has meant fewer potential trade-up buyers and sellers, meaning fewer people putting their homes on the market, adding to tight inventories of for-sale homes, according to the Harvard study.
Baby boomers still a factor
#The study makes one final point: Aging baby boomers may also contribute to the low levels of inventory and slower sales, and this contribution may be longer-lasting than the Gen-X trend.
#Mobility rates decline with age. The aging baby boom generation makes up the largest share of older homeowners who are likely to move less frequently.
#The oldest baby boomers are still only in their late 60s, so they’re going to remain a factor in the housing market for many years.
If for-sale inventories remain as tight as they are today, the Harvard study suggests there may not be enough turnover in the housing market to meet the needs of an aging millennial generation in the future.
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RAY AKERS is a licensed Realtor for Lake & Co. Real Estate in Seattle. Send your questions to ray@akerscargill.com or call (206) 722-4444.