U.S. Home Demand Cooled in March After A Hot Start to The Year

Many potential U.S. homebuyers withdrew from the market in March due to limited options, leading to a double-digit fall of a major housing demand index from the previous month.

The Redfin Housing Demand Index, released by the Seattle-based national brokerage Tuesday, dropped 13.9% from February to a seasonally adjusted level of 108 in March. The index reached a record high of 132 in January and dipped to 118 in February.

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Although March’s reading was almost 18% lower than January’s hot start, it was still the strongest March since 2013, according to Redfin.

A reading above 100 in the Index, composited through tours and offers made by thousand of Redfin customers, represents the three-year average for the period from January 2013 to December 2015.

Limited supply continued to be the scapegoat for demand trending downward, according to the report. In March, listings were down 12.5%  from a year ago throughout the 15 metro areas tracked by the index, marking the 22nd consecutive month of year-over-year inventory decline.  

"The market is missing its moment because of too-low inventory," Nela Richardson, chief economist at Redfin, said in the report.

Separately, there were 22.8% fewer buyers making offers to buy and 5.5% fewer requests for house tours in March, compared with February.

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As the economic fundamentals show signs of improvement, buyers are expected to be more active during the latter half of the year, the report said.

"Mortgage rates are the lowest they’ve been this year. Meanwhile low unemployment rates and high consumer confidence should create continued momentum in homebuyer demand. But, instead, we’re seeing demand cooling when it should be peaking," Ms. Richardson said.

"For this reason, we think the 2017 market will be a late bloomer, with new listings coming on later in the year and sales peaking in the early fall, instead of summer," she continued.