Supply of Homes for Sale Smallest Since At Least 1982
Roaring Sales Contribute to Shrinking Inventory
The supply of single-family homes for sale shrank again in August, hitting lows never recorded, according to new data from the National Association of Realtors (NAR).
Given the pace of home sales in August, the inventory of single-family homes on the market would only last 2.8 months, NAR said in its monthly report on Tuesday. By that measure, the supply hasn’t been as small since at least 1982, when NAR first started keeping track, data from the association shows.
- The supply of single-family homes for sale, as measured by how many months it would last, hasn’t been lower in the 38 years the National Association of Realtors has been keeping track
- Prices are hitting record highs as the market recovers from a COVID-19 slump
- Record low mortgage rates and work-from-home arrangements are contributing to increased demand, while lumber shortages exacerbate the tight supply
Fueled by record-low mortgage rates and a shift to more work-from-home arrangements, home sales have roared back from a pandemic-triggered slump. Increasing demand plus a surge in lumber costs related to wildfires in California has contributed to the shortage in supply and rising prices. In fact, while sales increased for the third consecutive month, the increase from July to August was modest compared with record gains the two previous months, a possible sign of that dynamic.
The scarcity of available homes “really keeps a lid on what we can see in terms of improvement in home sales activity over the next six months,” said Selma Hepp, deputy chief economist for insurance data company CoreLogic.
For perspective, a 6-month supply of homes encourages “moderate” price increases, with anything less than that pushing them up more quickly, according to NAR. In July, single-family inventory would have been exhausted in 3 months, matching supply levels as recently as February of this year, according to data from NAR. Before August, it had never dropped below 3 months.
"Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities," Lawrence Yun, NAR’s chief economist, said in a statement. "To assure broad gains in homeownership, more new homes need to be constructed."
Wildfires in California have led to a lack of lumber, Yun said, but despite supply headwinds, home sales are likely to increase through the rest of the year, given that 30-year fixed mortgage rates are averaging around 3% and the job market continues to recover. Demand for housing will especially grow in areas that are attractive to remote workers, he said.
Low housing construction since the last recession and people deciding to renovate rather than sell their homes has contributed to the low inventory, CoreLogic’s Hepp said.
The pandemic also has slowed the rate at which Baby Boomers are choosing to downsize or move to assisted living, she said, which restricts an important source of homes coming on to the market. At the same time, homebuyers are increasingly competing against investors who are buying single-family homes and turning them into rental properties.
Sales Rise to Highest Level Since 2006
Sales of all types of homes—including townhomes, condominiums, and co-ops—rose 2.4% in August, reaching a seasonally adjusted annual rate of 6 million—the highest level since December 2006—after gains of 25% in July and 20% in June. Sales of single-family homes rose 1.7% to a seasonally adjusted annual rate of 5.37 million after gains of 24% and 19% the previous two months.
The overall median price rose to $310,600 from $305,500 in July, surpassing $300,000 for the second time ever, according to NAR. Single-family home prices rose to $315,000 from $309,500.
“The housing sector has rebounded,” Federal Reserve Chairman Jerome Powell said in prepared remarks he delivered to Congress Tuesday.