Supply of homes for sale in U.S. hits lowest level in more than two decades
Hoping to buy a home that fits your needs and budget? You might want to settle in for a long search.
The inventory of homes for sale nationally last month dropped to its lowest level in more than two decades. And this month so far isn’t encouraging, with the number of homes on the market running well below the levels a year ago.
Typically, fewer homeowners list to sell in the winter, but the ultra-low level of properties on the market now makes landing one even more challenging, as the housing market continues to favor sellers over buyers.
“Extraordinarily few homes [are] on the market, and that means home shoppers will really notice fewer options when they go house hunting,†said Jeff Tucker, senior economist at Zillow. “And it means there’s more competition over the homes that do get listed.â€
Coming off the best year for sales since 2006, the height of the last housing bubble, the number of U.S. homes for sale last month stood at 910,000, the fewest on records going back to 1999, according to the National Assn. of Realtors.
The holiday season, colder weather and surging coronavirus cases may have given sellers reason to put off listing their homes last month. Another factor is simply that homes have been getting snapped up so quickly, often within days of hitting the market, that there are fewer listings that carry over from one month to the next.
Homes are flying off the market at a record pace thanks to a perfect storm: pandemic-induced demand for more space, low supply, and apps that make it easier to view, bid for and buy houses — all with a few swipes and clicks.
Consider that in December 2019, before the pandemic, there were 40.5% more homes on the market than there were last month, according to Zillow.
Sellers haven’t been in a hurry to list in the new year. New listings are down 10.1% so far this month from this time last year, while “active†listings are down 28.6%, according to Realtor.com.
“Real estate markets remain active so far this winter,†said Danielle Hale, chief economist for Realtor.com. “Data shows buyers continued searching the still-limited for-sale home supply last week, which declined again, along with new listings.â€
Traditionally, homes are slow to hit the market during the winter. The inventory typically picks up as the home-buying season starts in late February, then peaks in the summer.
COVID-19 unleashed new demand for homes, made the well-off wealthier, and fueled extreme bidding wars. The result? The $1-million home is everywhere.
That pattern generally held true over the last two years, as the pandemic upended the economy, then helped fuel a home-buying frenzy as Americans seized on record low mortgage rates to expand their living space. All told, sales of previously occupied homes reached 6.1 million last year, up 8.5% from 2020, according to the National Assn. of Realtors.
However, the sizzling housing market intensified a long-running demand-supply imbalance. And as buyers snapped up homes sometimes days after they hit the market, those still on the hunt were competing for fewer available properties.
Although housing demand is expected to once again far outstrip supply this year, economists expect home inventory to rise from rock-bottom lows by the end of 2022.
Sellers who were holding off because of the Omicron surge may list their homes this spring. Home builders are also expected to give the market a boost as they follow up a strong 2021.
Despite dealing with supply chain constraints and rising material and labor costs, U.S. builders broke ground on nearly 1.6 million housing units last year, a 15.6% increase over 2020.
Construction of new homes has risen the last three months and seems poised to climb further. Applications for building permits, which can forecast future activity, rose 9.1% in December to a seasonally adjusted annual rate of 1.87 million units. That’s the strongest month for permits since last January.
Meanwhile, mortgage rates, which have been rising on expectations that the Federal Reserve will begin dialing back its monthly bond purchases to tame inflation, could make for a less heated market. Higher rates reduce buyers’ purchasing power, which could force some to stay on the sidelines, giving an edge to those with more financial flexibility.
“A lot of home buyers are maybe going to be knocked out of the running by higher rates,†Tucker said.
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This is likely to be more pronounced in pricier markets, such as San Francisco, Seattle and Boston, and less likely to limit buyers in the more affordable markets in the Sunbelt and Southeast, he said.
Higher rates could also dissuade homeowners from selling, especially if they bought or refinanced when mortgage rates fell to new lows early last year.
“They may decide to just stay put, and that could hold back some of the inventory I otherwise would expect to hit the market this spring,†Tucker said.
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