There are 40% fewer homes on the market than last year, report finds

for sale sign
  • There are 40% fewer homes on the market than last year, a report by Black Knight finds.
  • Housing prices have steadily climbed through the pandemic, and supply keeps dropping.
  • Experts worry that increased housing prices are putting homeownership out of reach for many.
  • See more stories on Insider’s business page.

Housing prices have skyrocketed during the pandemic, as it seems many people bought new homes. But something else is going on, too: not enough homes are hitting the market.

A report from real estate analytics corporation Black Knight puts into perspective just how dire the situation is: housing inventory is down by 40% compared to the same time last year, with new listing volumes down 16% year-over-year in January and 21% in February, amounting to a 125,000 deficit in inventory compared to 2020 levels.

“Any hopes of 2021 bringing an influx of homes to the market and lessening pressure on prices appear to be dashed for now,” Ben Graboske, Black Knight’s data and analytics president, told real estate news site HousingWire.

Housing affordability is at its lowest point since 2019 due to the low inventory and increased housing prices, and as Insider previously reported, the increased prices are largely thanks to the low supply of lumber and high demand for houses.

The National Association of Home Builders found that the average price of a family home has increased by $24,368 since last April, mostly because of diminishing building supplies when lumber mills shut down at the beginning of the pandemic for safety reasons. After the mills began to reopen, lumber prices spiked by 200%, and in March, housing-data platform Zonda found that at least 70% of builders were intentionally raising home prices to slow demand and give them more time to acquire materials.

Also in March, a report from real-estate brokerage Redfin found the average home sale price hit an all-time record – increasing 16% year-over-year to $331,590 – and that one in three homes had sold for more than its asking price in February.

The increase in housing prices was of concern to Redfin Chief Economist Daryl Fairweather, who said in the report that it’s putting homeownership out of reach for many Americans.

“That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society,” Fairweather said.

Insider’s Taylor Borden reported on March 23 that the number of homes for sale could run out in just two months, and experts expect inventory to remain at record lows.

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The US housing-inventory crisis is starting to bite existing home sales, which fell the most since August last month

FILE PHOTO: Homes are seen for sale in the northwest area of Portland, Oregon March 20, 2014.  REUTERS/Steve Dipaola
Homes are seen for sale in the northwest area of Portland.

  • Existing home sales fell 6.6% in February to the slowest rate since August, according to NAR data.
  • Inventory held at a record-low 1.03 million, underscoring the market’s supply-demand imbalance.
  • The median selling price crept higher to $313,000 to tie the record high seen in October.
  • See more stories on Insider’s business page.

Sales of previously owned homes in the US declined more than expected in February as the housing market’s supply shortage further curbed the recent buying spree.

Existing home sales fell 6.6% last month to a seasonally adjusted annual rate of 6.22 million, according to data published by the National Association of Realtors. The reading is the first decline since November and drags the pace of sales to its lowest since August. Still, sales are up 9.1% from the year-ago level.

Economists surveyed by Bloomberg had expected a more modest drop to a 6.49 million sales rate.

The median existing-home price crept higher to $313,000, marking 108 consecutive months of year-over-year gains. The new level ties October’s record high and sits 15.8% above the year-ago level.

Home inventory remained at a record-low 1.03 million units at the end of last month. Unsold units now count for two months of sales at their current rate, up slightly from January’s 1.9 month supply.

Supply was down 29.5% year-over-year at the end of February, underscoring the shortage that’s contributed to higher prices and a now-slowing pace of sales. Home purchases first boomed at the start of the pandemic as record-low interest rates pulled borrowing costs lower. Mortgage rates set several record lows in 2020 and further boosted buying activity.

Supply strains have since lifted prices even higher, and mortgage rates are now reversing their months-long decline. Lumber shortages have also pressured costs, with the National Association of Home Builders saying last month that rising material costs are adding $24,000 to the price of new homes.

These obstacles will likely curb the market’s rally as the economy reopens, Nancy Vanden Houten, lead US economist at Oxford Economics, said.

“We look for the pace of existing-home sales to drift lower over the course of the year as headwinds from a lack of supply and eroding affordability are partially offset by the tailwinds of still-strong demand, particularly from younger households and a solid recovery,” she added.

The National Association of Realtors is more bullish toward the strained market. While affordability is weakening, strong savings and a boost from Democrats’ latest relief package should keep demand elevated through 2021, Lawrence Yun, chief economist at NAR, said.

“Various stimulus packages are expected and they will indeed help, but an increase in inventory is the best way to address surging home costs,” he added.

Contractors are struggling to rise to the occasion. Building starts for new privately owned residences fell 10.3% to a seasonally adjusted annual rate of 1.42 million in February, according to the Census Bureau. That’s the lowest level since August and marks a second straight month of decline.

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