The epic housing scarcity may lastly subside
A sale sign is seen near a home for sale in South Pasadena, California.
Frederic J. Brown | AFP | Getty Images
The epic housing shortage that began before the pandemic and then got worse may finally ease.
Suddenly there is more supply on the market, which will surely help frustrated buyers and could take some heat out of house prices in the longer term.
According to Realtor.com, new listings rose 5.5% year over year in June and 10.9% year over year. Among the country’s larger cities, the top 10 markets in new additions saw increases of 20% or more over the previous year.
“While there is still a significant shortage of properties for sale and property prices have just hit new highs, our June data report shows good news for buyers,” said George Ratiu, senior economist at Realtor.com. “The inventory decline has improved from the steep declines at the start of the pandemic, when sellers in various price ranges re-entered the market across the country.”
The surge in inventories is surprising as new additions historically fall between May and June, after the busy spring market. Today’s housing market is not following the usual rules, however, as the pandemic created an unprecedented sudden demand for larger suburban homes.
“The improvement we saw in new listing growth from May to June shows that historically sellers are entering the market later in the season, which could mean we will continue home buying into the fall as buyers seize new opportunities, ”added Ratiu.
The unexpected new offer is certainly welcome news for home buyers, many of whom have been sidelined in bidding wars, but the market is still extremely meager. The inventory of homes for sale declined 43.1% year-on-year at the end of May, representing 415,000 fewer homes for sale on a typical June day. However, this is an improvement over the more than 50% declines in March, April and May. New listings were higher again, but still well below the pre-pandemic average for June.
Still, the new offering gives some frustrated buyers more choice. In Washington, DC, where the market is extremely tight, it is common for most offers to sell well above the asking price within a week or two. New listings were up 36% year over year in June, but total supply is still down 9%.
“What I am seeing is the market easing slightly,” said Jennifer Myers, founder and owner of Dwell Real Estate Brokerage. “That means more people are signing up for their next house, which in turn means more offers are coming up because these people can now sell their current house. Little hinges swing big doors, they say.”
In the Dallas-Fort Worth market, which has seen high demand recently from California transplants, new listings were down 5% in June and total supply was down 59% year over year. Still, the monthly supply, which is a calculation of how much is being sold compared to what is for sale, increased slightly.
“Yeah, but not too much,” said Laura Barnett of the Re / Max DFW Association. “But it usually goes back to July. Demand also falls a bit for suburbs that are focused on the school year. But since this is a strange year, I’m not sure what will happen.”
The cities with the strongest growth in new entries are mainly in the Midwest. Milwaukee, with a 45% increase; Cleveland with 38%; and Columbus, Ohio, with 26% top the list. The outlier, San Jose, California, one of the most expensive markets in the country, saw new listings rise 41%. Phoenix, which had very strong pandemic demand for transplants from the northeast, saw new listings rise 28%.
On the flip side, Miami, which was probably the most popular destination for New York transplants last year, saw new entries decrease by 8%. Other southern cities, such as Raleigh, North Carolina and Nashville, Tennessee, also saw significant declines.
If more apartments continue to come onto the market and at the same time new construction increases steadily, the housing boom will slowly retreat. However, it is unlikely to see a sharp decline or “bust” due to favorable demographics alone and still historically low mortgage rates.
“If these trends continue, inventory levels and price growth could continue to weaken as the property market returns to a more normal pace of activity in the second half of 2021,” Ratiu said.