Throughout metropolitan areas nationwide, the tight supply of for-sale homes – already constrained pre-coronavirus – is continuing.
Although the increase in purchase mortgage applications signals a rebound of home-buyer interest and record-low mortgage rates could spur that further, “steeper declines in inventory could be on the horizon if more sellers don’t list homes to meet rising demand,” Realtor.com said in its weekly inventory report released Thursday.
For the week ending last Saturday, May 23, total inventory for sale dropped 22% year-over-year, the Realtor.com report said. That’s a larger drop than prior weeks.
NAR’s most recent numbers echo similar supply constraints. The number of homes for sale at the end of April totaled 1.47 million, the National Association of Realtors said last week. That’s the lowest level ever recorded for April, said Lawrence Yun, NAR’s chief economist, on a call with reporters.
“A colleague of mine estimated that we were about 3.8 million homes short to start the year in 2020, and that was before COVID,” Realtor.com’s Chief Economist Danielle Hale said, noting there’s been about a decade of under-building throughout the U.S. following the last housing boom and bust.
“This is not a new situation, but it has been exacerbated by the COVID situation, because sellers have decided to stay out of the market and also we’ve seen construction slow,” Hale said.
Earlier this year, inventory of for-sale homes hit lows not seen since 1999, NAR said in its January pending home sales report on February 27. That was coupled with strong home sales and housing starts, attractive mortgage rates and optimistic consumer confidence. Then the coronavirus hit in mid-March. Subsequently, some sellers hesitated in listing their homes or pulled the existing for-sale signs, putting further downward pressure on supply.
April data from 10 metro cities, published by local Realtor associations and reviewed by HousingWire, shows double-digit inventory declines from the prior year. May data is expected in about two weeks, and several real estate professionals anticipate it will continue April’s trend.
San Diego’s supply particularly stands out: Single-family home inventory dropped to 1.6 months of supply in April, or 38.5% down from the prior year, according to data from the Greater San Diego Association of Realtors. By comparison, a balanced housing market is considered to have six months of inventory.
And the most affordable price points in the San Diego area have the most constraint, with less than a month’s supply for homes priced between $250,000 to $500,000 and a 1.1 month pipeline for those from $500,001 to $750,000, the Realtors association data showed. That’s a year-over-year drop of 35.7% and 45%, respectively.
“We have a huge dearth of affordable single-family housing, but the crazy part was how little we had before” coronavirus, said Alanna Strei, a Realtor with eXp Realty in San Diego.
But buyer interest has been there – and growing.
“My showings haven’t slowed down,” said Strei, whose clients mostly fall in the $500,000 to $750,000 range. “Every single property I’ve written an offer on has (had) multiple offers. The last three have been seven offers.”
A majority of Strei’s clients are military members utilizing Department of Veterans Affairs home loans, which she said has made them “really strong buyers” in the bidding wars.
“We ended up winning these offers because their jobs are stable,” Strei said. “I’ve opened two escrows on Tuesday.”
Like San Diego, supply constraints continue to create a competitive buying environment in Austin — particularly in price points considered affordable for the area. The city of Austin has about 1.6 months of supply, roughly flat to last year, while the greater area has about 2.1 months, according to April data from the Austin Board of Realtors.
“I’m working with four different sets of buyers” right now looking for single-family homes, said Realtor Leonard Guerrero of JB Goodwin Realtors, and he’s offered “20 different offers between those four buyers, so that’s five apiece.”
Throughout several metro areas, the housing crunch is apparent in price points affordable to first-time homebuyers. In Milwaukee, an area that Realtor.com data showed had low supply based on the number of listings per thousand households, homes around $300,000 “are flying off the shelf,” said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors.
Ruzicka said the metro area has about 2.8 months of supply, down about 33% from last year. Although there’s been an under-supply of for-sale homes throughout the year, April’s inventory was particularly tight, he said, and predicts May numbers will show the same.
But despite the competition and short supply, buyers aren’t willing to spend substantially more than the asking price, Ruzicka said.
“The limited number of homes for sale will keep home prices relatively stable and this may give buyers using a mortgage (especially Millennials) some relief against investors and other cash-heavy buyers who are expected to play a smaller role,” Realtor.com said in a 2020 Housing Market Forecast earlier this month.
Now, there are some signals that more homeowners on the other side of the deal table – the sellers – are returning to the market every week.
Sellers putting their homes up for sale for the first time, classified as new listings, were down 20% year-over-year for the week ending last Saturday, but a “sizable improvement” over the 30% to 40% declines in previous weeks, Realtor.com said in its report released Thursday.
“It’s still not better than last year; there are still some signs that we’re not back to normal yet,” Hale, Realtor.com’s chief economist, told HousingWire. “But it’s definitely a step in the right direction.”
