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In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “How do you rate the past month's buyer/seller traffic in the neighborhood(s) or area(s) where you make most of your sales?”
REALTORS®reported strong home buying demand amid tight supply in March 2017, based on the March 2017 REALTORS® Confidence Index Survey Report. Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that buyer traffic conditions can be characterized as “moderate” to “very strong” in many states except in Wyoming where buyer traffic conditions were “weak.”[1]
The REALTORS® Seller Traffic Index indicates seller traffic conditions were “very weak” to “weak” in most states, but conditions were “moderate” to “strong” in 15 states, which includes oil-producing states that have been impacted by the collapse in oil prices since the middle of 2014.[2] Respondents reported that demand is strong, but supply is lacking, especially homes that are affordable to buyers. This is consistent with available data on the affordability of active housing inventory.[3]
Employment conditions affect the supply and demand for housing. Nationally, employment rose 1.6 percent in February 2017 compared to February 2016. Employment growth was strongest in Idaho, Nevada, and Utah. In these states, buyer traffic was “strong” to “very strong”. Non-farm employment contracted in the oil-producing states of Alaska, North Dakota, Wyoming, Kansas, Oklahoma, and Mississippi, as well as in West Virginia.[4] The chart below shows the share of oil production to the state’s economy. In some of these states, the job cutbacks have led to “moderate” seller traffic conditions, based on the REALTORS® Seller Traffic Index. Texas, which has a more diversified economy, has been more resilient than other oil-producing states, with employment growing slightly above the national average.
The REALTORS® Buyer Traffic Index registered at 74 in March 2017 (70 in February 2017; 69 in March 2016), indicating that more respondents viewed buyer traffic conditions as “strong” rather than “weak.”[5] Homebuying demand is likely being bolstered by sustained job growth, with 2.2 million jobs added in the last 12 months and 16 million jobs generated since February 2010.[6] The unemployment rate fell to 4.5 percent in March 2017, the lowest rate since the economic recovery from the 2008-2009 recession. Future interest rate increases may also be prompting first-time homebuyers to take advantage of the current mortgage rates. In the week of April 6, the 30-year fixed mortgage rate averaged 4.1 percent, and rates have held above four percent since the week of November 24, 2016.[7] Mortgage rates are likely to continue to rise modestly to an average of 4.4 percent in 2017 and 5.0 percent in 2018.[8]
The REALTORS® Seller Traffic Index registered at 43 in March 2017 (41 in February 2017; 45 in March 2016), indicating that more respondents viewed seller traffic conditions as “weak” rather than “strong.” Supply conditions have remained largely tight in many areas, with the index registering below 50 since February 2008.
[1] To increase the number of observations for each state, NAR computes the index based on data for the last three months. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. The survey asks, “How do you rate the past month's buyer/seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” NAR compiles the responses into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very Weak,” values greater than 25 to 45 are labeled “Weak,” values greater than 45 to 55 are labeled “Moderate,” values greater than 55 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.” The range of +/-5 around 50 approximates the historical margins of error at the 95 percent confidence level for small states.
[2] While the price of oil has picked up in the last year, the March 2017 price was roughly half the price that prevailed in Summer 2014 before the collapse, so oil-dependent economies may see some improvement, but generally remain at a low level.
[3] See for example: https://www.nar.realtor/news-releases/2017/02/nar-realtorcom-identify-growing-rift-between-housing-availability-and-affordability and https://www.nar.realtor/topics/realtors-affordability-distribution-curve-and-score
[4] Source: U.S. Department of Energy. See https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm.
[5]The REALTORS® Buyer Traffic Index provides information on the level of homebuying demand or interest, which may materialize as a contract to purchase or closed sale after two or three months.
[6] The last 12 months refers to February 2016 to February 2017. Nearly 8.7 million jobs were lost from February 2008–February 2010, so the gain above previous peak employment is 7.4 million jobs.
[7] Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac.
[8] NAR forecast. See https://www.nar.realtor/sites/default/files/reports/2017/embargoes/forec....
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