Posted in Economist Commentaries, Uncategorized, by Scholastica (Gay) Cororaton, Research Economist on March 7, 2018
In a monthly survey of REALTORS®, respondents are asked “Compared to the same month last year, how would you rate the past month’s traffic in neighborhood(s) or area(s) where you make most of your sales?” Respondents rate buyer traffic as “Stronger” (100), “Stable” (50), or “Weaker” (0) and the responses are compiled into a diffusion index. An index greater than 50 means that more respondents reported “stronger” than “weaker” conditions.
The chart below shows buyer traffic conditions in November 2017–January 2018 compared to conditions one year ago, according to the January 2018 REALTORS® Confidence Index Survey. Except in two states, REALTORS® reported that buyer conditions were “stable” (unchanged) to “very strong” compared to conditions one year ago, including in the District of Columbia (unchanged).[1] The states with the strongest buyer traffic are Washington, Idaho, Nevada, and Utah. Respondents from Texas and Florida, states which were hit by hurricanes Harvey and Irma, generally reported “strong” buying activity compared to one year ago. On the other hand, REALTOR® respondents from Alaska and West Virginia respondents generally reported “weak” buyer traffic compared to one year ago, and this may be related to the effect of the slump in oil prices since 2015, though oil prices have started to firm up again in 2017 as OPEC cut its oil production.
In contrast, only five states have “strong” supply conditions in November 2017–January 2018 compared to one year ago: Alaska, North Dakota, Nevada, Rhode Island. and Utah. In many states, seller conditions have remained “stable” compared to one year ago, which means that the level of supply has not changed compared to one year, even if demand has been increasing. In 22 states, supply conditions are “weak” compared to one year ago.
At the metro area level, data on the number of active listings on Realtor.com indicates how serious the lack of supply is. Of the 500 metro areas tracked by Realtor.com, active listings are lower compared to one year ago in 395 out of 500 metro/micro areas, 80 percent. Areas in red show active listings are lower compared to one year ago, while areas in blue have more active listings.
Nationally, the REALTORS® Buyer Traffic Index registered at 69 (66 in December 2017; 63 in January 2017), while the REALTORS® Seller Traffic Index was at 44 (47 in December 2017; 41 in January 2017). An index above 50 indicates that more respondents reported stronger than weaker conditions compared to one year ago, so the data indicates that homebuying demand continues to outpace supply.
[1] In generating the indices, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. For graphical purposes, index values from 25.01 to 45 are labeled “Weak,” values of 45.01 to 55 are labeled “Stable,” values of 55.01 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.”