You can’t buy what isn’t for sale.
That’s the hard truth that house hunters ran up against as home sales fell for the third straight month, stifled by a lack of houses on the market, new data released Friday shows.
- Home sales fell 2.7% in April, the third straight monthly decline, as the inventory of homes on the market stayed near record lows, the National Association of Realtors said Friday.
- A shortage of sellers, not buyers, is driving the decline in sales. Prices continue to climb as multitudes of buyers compete over the few homes for sale.
- Homebuyers have resorted to making offers over the asking price, waiving inspections, and even writing personalized letters to tug on the heartstrings of sellers.
Sales of existing homes—including single-family, townhomes, condominiums, and co-ops—fell 2.7% between March and April, dropping to a seasonally-adjusted annualized pace of 5.85 million units, significantly lower than the recent peak of 6.73 million in October, according to the National Association of Realtors (NAR). There were 1.16 million available homes for sale in April, 10.5% more than in March, but still near record lows.
“Our suburbs are just absolutely insane,” said Mike Opyd, managing broker and owner of ReMax Next, a real estate brokerage in Chicago. “There is literally no inventory for anyone to buy.”
In the Chicago suburbs where often Opyd works, homes listed for sale are so flooded with potential buyers that getting into an open house is like “standing in line trying to get into a club in Vegas,” he said. Some buyers are even writing personal letters to home sellers begging to be selected to purchase the house.
While prospective home buyers have been encouraged by relatively low mortgage rates, it seems like everything else has been working against them lately. There are so few homes for sale that bidding wars, all-cash offers, and even pressure to forego inspections have become more frequent. To make matters worse, homebuilders have been hindered by shortages of materials and sky-high prices.
The 5.85 million annual rate for April fell short of the 6.09 million expected by economists, according to a median estimate cited by Moody’s Analytics. Only a few months ago, the monthly annual rate was consistently well over 6 million, reaching levels not seen since 2006.
17 Days on the Market
As demand continued to outpace supply, the median sale price rose 4.6% month-over-month to a record high of $341,600 in April, with single-family homes selling for a median of $347,400. Houses that sold flew off the market, spending an average of 17 days up for sale in April, compared with 18 in March and 30 to 40 during many pre-pandemic months.
The frenzy is unsustainable, by some accounts.
“We are seeing some early signs that the market has reached its maximum temperature,” Redfin Chief Economist Daryl Fairweather wrote in a commentary. It's possible that "some buyers would rather spend their money on restaurants, vacations, and other things they have held back on for the past year, instead of on housing now that the threat of the pandemic is dissipating in America. But make no mistake, the housing market is still very hot and will remain hot for the rest of the year.”
Fortunately, there are several reasons to be optimistic things will start to cool down, said Lawrence Yun, chief economist of the NAR, in a statement. As anxiety about contracting COVID-19 fades and homeowners become more comfortable allowing people into their homes, the supply of houses for sale should increase in the coming months. A declining number of people in mortgage forbearance will also help, he said.