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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Surging lumber costs have increased the average cost of a new house by $24,000

lumber and building materials store
  • Lumber prices have skyrocketed since the pandemic began, adding $24,000 to the price of new homes.
  • Demand for materials soared during the pandemic as supply tightened with factories idle.
  • The National Association of Home Builders chair said vaccine rollout should help bring costs down.
  • See more stories on Insider’s business page.

While the pandemic hit the US, everyone seemed to want their own house. With mortgage rates at record lows and no need to commute to work in cities for at least 2020, prices soared everywhere. But they’re also soaring because there isn’t enough wood out there: lumber, to be exact.

Now it’s clear how much the lumber shortage is adding to the skyrocketing price of new homes: a whopping $24,000.

That stat is courtesy of the National Association of Home Builders (NAHB), which found the price of an average family home increased by $24,386 since April, with the market value of a multifamily home increasing by $8,998 over the same time period.

A report from the NAHB in February said the lumber supply chain impact came as factories shut down almost immediately last March for safety reasons, and then as demand spiked, supply couldn’t keep up. Lumber prices have jumped by almost 200% since April 2020.

“The elevated price of lumber is adding approximately $24,000 to the price of a new home,” NAHB Chairman Chuck Fowke told real estate news site HousingWire. “Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”

Zillow’s Producer Price Index found that February’s 2.8% annual increase in sales was the strongest it had been since October 2018, meaning that while more houses are being sold, supply for building materials, like lumber, remain low and costly.

On March 12, the NAHB, along with more than 35 other housing organizations, wrote a letter to Commerce Secretary Gina Raimondo asking her to examine the lumber supply chain and look into solutions for the high costs.

“Housing and construction can do their parts to create jobs, boost the economy to its pre-pandemic strength, and provide safe and affordable housing for all Americans, but in order to do so the federal government needs to address skyrocketing lumber prices and chronic shortages,” the letter said.

Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees, the letter said, emphasizing the economic benefits the government would reap in finding solutions to the expensive building materials.

Fowke told HousingWire that the continued rollout of COVID-19 vaccines will help decrease the costs of lumber since more mills will be able to safely reopen, and with more homes being built, home builder confidence should rise. (Homebuilder confidence fell by two points in March.)

The timeline on when material prices will decline is yet to be determined, but prices might start to come down with President Joe Biden on Monday promising 100 million COVID-19 shots in the next 10 days.

“Shots in arms and money in pockets – that’s important,” Biden said.

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