Tight housing inventory is holding back the normal burst in home sale activity in the Lehigh Valley, and at the same time it’s leading to an increase in prices.
According to the Greater Lehigh Valley Realtors, closed sales dropped 33.6% to 432 listings while inventory slipped 27.5%, with only 498 units on the market in April in Lehigh and Northampton Counties
“Housing inventory remains tight here in the Lehigh Valley and nationwide – if you can believe there were only 980,000 units (nationally) available for sale heading into April,” said GLVR CEO Justin Porembo. “The lack of existing inventory continues to impact home sales. Competition for available properties remains strong, especially in certain price categories, with multiple offers again dominating the market.”
He noted that the median sales price for a home in the Lehigh Valley has gone up 12.5% to $315,000
The homes that are available are selling according to the GLVR. The months’ supply of housing inventory dropped 20% to 0.8 months, with homes selling in 24 days on average. That’s an increase of 71.4% or 10 days
In Carbon County, the median sales price increased to $231,000. Closed Sales remained steady at 59. Pending Sales dropped to 53. New Listings slipped to 70. I
“I recently spent several days in Washington, D.C., attending the 2023 Realtors Legislative Meetings,” said GLVR President Howard Schaeffer. “A key takeaway from economists from the National Association of Realtors and the National Association of Home Builders was that increasing interest rates will not fix the inventory problem.”
He said new construction may be able to ease the housing price issue.
“Housing prices are still rising because of limited housing options on the market. Homebuilding is the policy we need to bring that inflation down, not interest rate hikes. Nationally, we need to be building more than 1.1 million homes a year to have a meaningful impact on the lack of inventory. Leadership within our association looks forward to continuing the conversation regarding inventory and affordable housing with local organizations, builders, legislators, and other valuable parties.”
The red-hot housing market of last year is increasingly slowing as interest rates and consumers fears rise.
James Colestro, executive vice president, retail lending and business banking, Northwest Bank, said the housing market is in the process of slowing as rising mortgage rates are weighing on housing affordability.
“While we saw a little pickup this week, existing home sales have fallen every month through the end of August after peaking in January,” he said.
There was a 12.6% decrease in new single-family home sales in July, which is a seven-year low, said Brad Sanders, director of Personal Wealth Management at Stonebridge Financial Group.
And listings are sitting on the market for 12.5% longer than they were a year before, and construction is also slowing, he said, due to the reduced demand and ongoing supply issues.
At the same time, Colestro said home prices have remained strong. “There’s always a little lull when kids go back to school, but beyond that we’re seeing continued year-over-year increases to home prices mixed with sharply rising rates, and it’s taken a lot of people out of the market.“
Sanders said while inflation has slowed slightly, it hasn’t slowed as much as the Federal Reserve would like so, more than likely, they are on pace to continue raising interest rates. The Fed increased interest rates by 0.75% Sept. 21.
“As such, mortgage rates could continue to rise past 6%, which is already the highest we’ve seen since the Global Financial Crisis of 2007-2008,” Sanders said.
“While the increase in the fed funds rate was widely expected, higher rates have certainly had an impact on residential real estate. The U.S. 30-year mortgage rate has risen to around 6.25% after averaging just 2.96% in 2021,” Colestro said.
The higher rates, he said, are not only affecting affordability, but it’s also creating so much uncertainty that it’s causing some potential buyers to stay on the sidelines.
Colestro cited an example of the monthly payment on a $250,000 house at current rates is approximately $500 per month more than in January.
Because of the uncertainty in the market, “What remains to be seen is how sharply housing prices will fall, but we don’t expect a housing crash or financial crisis as bad as what we saw in 2007-2008,” Sanders said. “Lending standards have increased substantially since then, and there is still a supply/demand imbalance due to years of lower new home builds.”
“Typically, a higher interest rate environment is less favorable for home prices due to higher monthly payments. The Case-Shiller U.S. National Home Price index is still increasing, but prices are appreciating at a slowing rate.” Colestro said. “It’s certainly not the seller’s market it was last year, and sellers can no longer expect homes to sell in a matter of weeks.”
Sanders agreed. “The seller’s market has certainly cooled, and at this point, both buyers and sellers are being incentivized to remain on the sidelines. Buyers think prices might come down further, and sellers don’t want to give up the low mortgage rates they have locked in.”
The labor market is also still quite tight, Sanders said, and the average homeowner has high equity in their home, so the pressure to sell isn’t very strong. According to Fannie Mae’s Home Purchase Sentiment Index, the percentage of consumers who believe it’s a good time to sell has decreased from 57% in May to 24% in August, he added.
At the same time, Sanders said home construction has slowed down as builders have grown more worried about reduced demand due to the higher mortgage rates.
Colestro said, as a result, an increasing number of builders are reporting taking action to try and increase activity including reducing prices, assisting with rate buydowns, and offering free or reduced-price upgrades to the project.
“Builders also continue to grapple with increased construction costs due to supply chain problems and aggressive monetary policy. Even though housing starts surprisingly increased in August, builders are cautious, and permits to build new houses fell 10% in August,” Sanders said. “It would not be surprising to see softening in home construction in the coming months, as leading indicators are suggesting.”
One of the factors that continue to drive up housing prices, Colestro said, especially for new builds is the rising cost of raw materials needed for construction. These prices for construction material will eventually find their way into the price of the new home, he added.
In addition to the cost of raw materials, homebuilders are finding shortages and delays in getting the materials and are having a difficult time finding employees, further complicating the home building process. As a result, we have seen new housing starts slow from higher levels in late 2021 and early 2022.
“We suspect many developers may delay construction on some projects until the economic environment improves and they feel better about the prospects of selling,” Colestro said.
Most of the predictions for 2023 show an overall decline in the mortgage market compared to 2022, Colestro said, but it’s a little bit skewed as there was still robust refinance activity in the first quarter of this year.
“Early predictions show purchase activity to be on the rise next year,” he said. “One thing we know in mortgage lending is that it’s an incredibly cyclical business. It may be tough right now, but rates will come back down and today’s purchases at 6.25% will be tomorrow’s refinance at 4.50%. It may take a little time, but we’re confident the market will come back.”
The hot housing market hit another record high as the median sale price rose $40,000 in May, according to The Greater Lehigh Valley Realtors.
While the May data showed that year-over-year, the two Mays were compatible, this May set a record high, even as interest rates are on the rise.
“High home prices and a surge in mortgage interest rates are slowing buyer activity, and economists predict sales will continue to soften in the near future, but this may then put some much-needed downward pressure on home prices,” said GLVR CEO Justin Porembo. “Current housing market conditions are not ideal for buyers. We know this. We see this. We’re taking this information to where it matters.”
GLVR’s Government Affairs Director Matthew Marks led a contingent of REALTOR members to the Capitol on June 8 to meet with legislators to discuss the housing market, how record-setting prices and low inventory are impacting Pennsylvanians trying to buy homes.
“Our advocacy for both buyers and sellers doesn’t end with one advocacy day in Harrisburg,” said Marks. “Legislators from the Greater Lehigh Valley were each given a report that details the current housing market in their district, and we were able to discuss directly with them how their constituents are being affected. Our legislators having a pulse on these issues will hopefully lead to solutions and relief in known trouble spots.”
In attendance for the Hill Visit were GLVR CEO Justin Porembo, GLVR Government Affairs Director Matthew Marks, 2022 GLVR President Howard Schaeffer, Noelle Seaton of Home Team Real Estate, Chris Raad of Harvey Z. Raad Realtors, Craig Martin Jr. of Home Team Real Estate, and Sean LaSalle of BHHS Fox & Roach.
The group shared the May report with legislators citing closed sales dipped 22 listings over last May – or 3.3% – to 649. With inventory still not at sufficient, comfortable levels – there were just 660 units in May for Lehigh and Northampton counties – the Median Sales Price increased 16% percent to $290,000.
That beats the Median Sales Price record that was set in March and April at $280,000, GLVR said. Other notable housing statistics for May include:
* New Listings slipped 0.9 to 994. * Pending Sales were down 2% to 854. * Months Supply of Inventory was down 10% to 0.9 months. * Percentage of List Price Received increased from 1.7% to 104.4%. * Homes sold, on average, in 16 days, up just one day from May 2021.
In Carbon County, the Median Sales Price increased to $225,000. Closed Sales went up to 77. Pending Sales slipped just three listings to 77. New Listings jumped to 104. Inventory fell to 100 units, leading to a Months Supply of Inventory of 1.4 months. Properties moved at a hot pace for the association’s more rural county, with Days on Market coming in at 22 days.
“While inventory is still low, the slowdown in sales has provided a much-needed lift to housing supply, with inventory actually starting to trend in a positive direction,” said GLVR President Howard Schaeffer.
“As the Greater Lehigh Valley and the nation continues to explore ways to solve the ongoing housing shortage, we look forward to working with state and federal legislators, and our counterparts at the Pennsylvania Association of Realtors and the National Association of Realtors, on ways to expand housing access through a number of administrative and legislative actions and to help relieve the nation’s housing crisis,” he said.
Mirroring what’s happening in other markets, home sales in the Lehigh Valley declined in October but are still on track to beat last year’s total.
Closed sales in Lehigh and Northampton counties fell 16.4% the previous month, from 912 to 762, according to a release from the Greater Lehigh Valley Realtors, a trade association.
Year to date, however, they’re at 7,137, which is 10.5% ahead of 2020’s pace.
“It’s still a strong market,” Tim Tepes, 2021 president of the Greater Lehigh Valley Realtors, said in an interview.
Several factors account for the recent slowdown, he said, including inflation and the upcoming holiday season. Although they remain under 4% for a 30-year, fixed-rate mortgage, rising interest rates are also giving some potential homebuyers pause, Tepes added.
The persistent inventory shortage helped boost the median sales price in October from $240,000 to $260,000, an 8.3% jump.
Through the first 10 months of 2021, the median sales price was $255,000, up 13.3% from the year before. The percentage of list price received was 101.7% last month, more evidence it remains a seller’s market. The average time on the market was 16 days.
Rural Carbon County is also covered by the Greater Lehigh Valley Realtors. There, the median sales price increased 1.4% in October to $175,000, and average days on market fell from 44 to 30 days.
In the release, Justin Porembo, CEO of the Greater Lehigh Valley Realtors, noted that rents are rising, too.
“With the strong activity and desire for Lehigh Valley living, we’re also seeing single-family rent prices increasing rapidly, as demand for single-family housing and inventory constraints (is) forcing some buyers to rent, increasing competition and pushing rents up across the Lehigh Valley.”
The National Association of Realtors is forecasting improved inventory in 2022, the release said, which could bring price increases down.
Still, “there is no longer a time of year that is better or worse to enter the housing market,” Tepes said in the release.
“If you’re thinking about selling, there is no doubt a buyer is ready to strike.”
Although many people were forced to put activities on hold over the past year, buying a new home was not one of them. The U.S. housing market, buoyed by record low interest rates, remote work and Americans’ desire for more space, outperformed much of the economy throughout 2020. Today, it remains more lopsided than ever as the gap between buyer demand and supply widens, according to a new report issued today by realtor.com® that examined COVID-19’s impact on the U.S. housing market one year after the World Health Organization declared the virus a global pandemic.
Therealtor.com® Housing Market Recovery Index, which was created to measure the pandemic’s impact on the housing market by tracking movement in new listings, buyer demand, time on market and prices, stood at 101.6 for the week ended March 6. Aside from new listings, which remain below the pre-COVID baseline, the market is tracking ahead of pre-pandemic levels at the end of January 2020.
“The housing market bounced back so much faster than other sectors of the economy that many have forgotten that housing activity slowed to a crawl during the early days of the pandemic,” said realtor.com® Chief Economist Danielle Hale. “One year later, the demand for housing remains strong, while supply remains limited.”
However, Hale noted, there are reasons to believe a change may be on the horizon. “The housing market’s lopsided momentum could ease in the coming months,” she said, adding, “We expect the vaccine’s rollout to alleviate some sellers’ anxieties, which could help the supply crunch. At the same time, although interest rates remain low, they’ve begun to increase, which could test buyer demand in the coming months.”
Median listing prices up 14.3% year-over-year
After stalling at the onset of the pandemic, listing prices have posted double-digit price growth for the past 30 weeks. The gap between supply and demand was sizable before the pandemic, and in a move that surprised many, the pandemic boosted buyer interest without a commensurate increase in seller activity, worsening the market’s existing imbalance and driving to record highs.
New listings are a sliver of what they were
Nearly a year after the onset of the pandemic, new listings, which gauge seller activity, were 27% lower than they were during the week ended March 7, 2020. Following an uptick at the end of 2020, the first few months of 2021 have been marked by large and consistent declines in new listings. New listings traditionally increase in March and April, and the expectation is they will grow again this year, especially compared to last year when the disruptions to seller activity were largest. The lack of listings in January and February of this year has created a 200,000 gap in new listings, making it necessary for new listings to come on to the market for healthy sales activity this spring.
“The pandemic not only changed what people want in a home but also how they shop for one with more and more of the process taking place online,” said realtor.com® CEO David Doctorow. “In an environment where the number of homes listed for sale is limited and affordability is becoming more of a concern for many, the competition to find the home of your dreams is greater than ever. With features like real-time alerts when new listings come onto the market, video tours that allow you to tour a home immediately and our mortgage calculator, realtor.com® is helping to give people the tools they need to make informed decisions.”
There are 50% fewer homes available for sale now than a year ago
Total active inventory continues to decline, dropping 51% year-over-year in the week ended March 6. With buyers active in the market despite, or perhaps because of, the uptick in mortgage rates, homes are selling quickly and the total number actively available for sale at any point in time continues to decline.
There’s no time “to think about it”
During the week ended March 6, homes sold six days faster on average than a year earlier. Buyers not only have fewer homes to choose from, they need to act fast to succeed.
Ignoring near-record snowfall in the Lehigh Valley, home sales kept their up their torrid pace, increasing 8.9% from January 2020 to January 2021.
Last month, 515 houses sold in Lehigh and Northampton counties, up from 473 a year ago.
It’s too bad real estate agents can’t take the heat from the market to melt the snow, said Tim Tepes, 2021 president of Greater Lehigh Valley Realtors, the trade association that compiles monthly and other statistics.
Snow shovels have become necessary equipment for showings these days, he said. “The market is really strong.”
January started off with healthy buyer demand and market fundamentals, Greater Lehigh Valley CEO Justin Porembo said in a release. Combine that with mortgage interest rates setting record lows and the drive by many buyers “to secure a better housing situation – in part due to the new realities brought on by COVID-19 – (and) our market is experiencing a multiple-offer frenzy not normally seen this heavily during the winter months.”
In addition to a healthy increase in final sales, pending sales (a sign of future activity) rose 3% in January, to 592; median sales price jumped 27%, to $234,900; and the percentage of list price received grew 2.4 percentage points, to 99.8%.
On the inventory side, new listings dropped 10.2 percent to 590. Inventory overall remains very low, shrinking sharply 56.3 percent in January to 567 units, leading to a months’ supply of inventory of just 0.8 months. Days on market in January was 22, 46.3% less than the 41 in January 2020.
This mirrors trends across the country. Existing-home sales continued to increase in January to a seasonally-adjusted annual rate of 6.69 million, up 23.7% from one year ago, according to the National Association of Realtors.
Meanwhile, the U.S. median existing-home sales price rose to $303,900, 14.1% higher from one year ago, and housing inventory skidded to an all-time low of 1.04 million units. The inventory slippage of 25.7% year-over-year is also a record decline nationally.
Tepes said it’s frustrating for entry-level buyers to prequalify for a mortgage but not be able to find a house. A home put on the market may receive four or five offers in just the first day, he said.
In a recent seven-day period, 145 houses were listed but 216 became pending sales, Tepes said. That’s great for the seller – until that seller becomes a move-up buyer dealing with the same inventory shortage as other buyers, he said.
New construction could help temper the shortage, but only so much.
“A robust increase in housing starts in December points to an active year for new construction, but higher material costs, especially lumber, and a limited supply of buildable lots will temper the number of new units,” Tepes said in a release.
“As we look to 2021, signals suggest buyer demand will remain elevated and tight inventory will continue to invite multiple offers and higher prices across much of the housing inventory. The new construction mentioned is welcome and exciting but also not quite enough to change the inventory narrative through the coming year.”
(Greater Lehigh Valley Realtors also covers Carbon County. There, in January 2021, the median sales price increased to $175,000, closed sales were 59 and pending sales decreased to 62, a difference of five from the previous January. New listings fell to 54, inventory dropped to 102 units, leading to 1.3 months’ supply of inventory. Days on market “are moving much faster for the association’s more rural county,” the release noted, with that measurement dropping 44% percent to 47 days.)
As a relationship-driven, people-facing industry, real estate is facing the turbulent effects of COVID-19.
“As we progressed through February, the actual and expected impacts of COVID-19 continued to grow, with concerns of economic impact reaching the stock market in the last week of the month,” said Jack Gross, president of the Greater Lehigh Valley Realtors, in the GLVR February market report. “As the stock market declined, so did mortgage rates, offering a bad news-good news situation. While short term declines in the stock market can sting, borrowers who lock in today’s low rates will benefit significantly in the long term.”
However, Gross said with so much changing regarding the virus, it’s hard to make any definitive statements about its effects on the housing market since information, even from the Pennsylvania Association of Realtors, is subject to change daily.
Gross, who is president of Better Homes & Gardens Real Estate Cassidon Realty in Bethlehem, said he directed his company not to conduct open houses.
“We are trying to keep things moving forward, so far it’s working,” Gross said. “Is it going to affect our business? Absolutely. The leadership is focusing on everybody staying safe first.”
Gross said COVID-19 has put a completely new dynamic on seeing things for him, and he is telling his staff not to panic.
“We will survive this and we will get past this,” Gross said.
Up until last week, the industry had the same factors of low inventory, a seller’s market and warmer weather that helped boost traffic in showing activity, he said.
Overall, the February data showed tight inventory and another record low for months’ supply of inventory. For Lehigh and Northampton counties, that figure came in at 1.4 months, beating January’s one-month record for lowest months’ supply of inventory since GLVR began tracking statistical housing data in 1996.
The report showed closed sales were flat, with 450 closed sales in February 2019, compared to 449 in February 2020.
The median sales price increased 8% to $199,999.
Sellers were encouraged with the percentage of list price received increasing 0.8% to 97.8%.
Days on market remained at 50 days.
New listings decreased 2.4% to 691.
Pending sales were up 14.5% to 686.
Inventory levels shrank 36.6% to 1,049 units, leading to a months’ supply of inventory that was down 41.7%.
Greater Lehigh Valley Realtors released its October data on the local real estate market, which showed low housing supply continuing to hold back sales.
However, experts see some bright spots for next year, with the potential for continued low mortgage rates in 2020, a move that could support buyer demand and boost sales.
While mortgage rates in October increased slightly from the three-year lows in September, mortgage rates are still about 1 percent lower than this time last year. In addition, the Federal National Mortgage Association (Fannie Mae) said it predicts continued low rates and possibly lower rates could come in 2020.
Also from the October report, new listings decreased 8.2 percent to 924 compared to October 2018, which showed 1,006 new listings.
In addition, pending sales increased 8.6 percent to 767 compared to October 2018, which showed 706.
Meanwhile, inventory levels dipped 26.1 percent to 1,695 units, compared to 2,295 in October 2018.
The report showed prices continued to gain traction. The median sales price increased 6.7 percent to $212,000, as compared to $198,750 in October 2018.
In addition, the days on market figure was down 10.5 percent to 34 days, compared to 38 days in October 2018.
Furthermore, the months’ supply of inventory was down 30.3 percent to 2.3 months, compared to 3.3 in October 2018.
This season is typically a slower time of year for home sales, according to the report.
However, historically low mortgage rates will continue to support buyer demand and may create additional lift to home prices as affordability gives buyers the ability to offer more to secure their home, the report said.
Throughout much of the country, the continued low level of housing inventory also continues to constrain sales activity from where it would likely be in a balanced market.
The housing market, which started the year slowly, is picking back up, according to bank and mortgage lenders.
Spring has brought with it a flurry of activity, with homes popping into the market quickly and being sold in the blink of an eye.
But executives say there are still challenges, such as a drop in mortgage loans, limited inventory, stiff competition among homebuyers and a dip in sales on higher-priced homes.
“The local housing market remains a mixed bag. In some local markets, there is very high demand and limited supply causing a seller’s market,” said Kevin Schmidt, president and CEO of The Neffs National Bank in North Whitehall Township.
“In other areas, sellers are holding out for higher prices, causing a slowing market,” Schmidt said “The Neffs National Bank has seen a decrease in mortgage loans versus this time last year.”
But he is optimistic about the future.
“We believe an increase in inventory, reduced prices and continued low rates could spur (home) purchase demand. Mortgage rates remain low,” Schmidt said.
At the end of May, the average interest rate on a 30-year fixed mortgage was 4.23 percent, according to the Mortgage Bankers Association, a national grade group.
One of the biggest drags on real estate has been a lack of homes for sale.
Jeff Scheuren, president and COO of Lancaster-based Fulton Mortgage Co., estimated that housing inventory in the Lehigh Valley is down 10 percent from last year at this time, with buyers competing against each other aggressively for houses. There are fewer homes up for grabs in the mid-range market, which he defines as homes in the $275,000 to $400,000 price range.
Scheuren noted that Realtors are competing more aggressively at a time when inventory is down in Pennsylvania – especially in Berks County.
“First-time homeowners are getting pre-qualified for home loans, and they are having a hard time finding what they are looking for,” he said.
Mortgage lenders have had to accommodate contracts designed for shorter time frames.
“Why not close on a home after 30 days instead of 60 days?” Scheuren said, adding that two popular financing options are government-sponsored mortgage guarantors Fannie Mae and Freddie Mac.
Fulton Mortgage Co. is under the same umbrella as Fulton Bank and Lafayette Ambassador Bank, which have offices throughout eastern Pennsylvania.
Still, Realtors and brokers are optimistic.
“Maybe the housing market is not as euphoric as it once was, but I definitely do not see any indicators of a slowdown,” said Larry Ginsburg, president and owner of Berkshire Hathaway Home Services Regency Real Estate in Allentown.
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