Realtor.com Expects a New Housing Shortage
SANTA CLARA, Calif. – Nearly two years after the for-sale housing inventory hit its lowest levels in recorded history, the market is showing signs that a gradual increase in the number of homes for sale may be changing direction, according to realtor.com’s September 2019 housing trend report.
According to the data, increased demand from lower mortgage rates prompted a 10% year-over-year decrease in available homes under $200,000 and a reversal after 18 months of inventory gains in the mid-market.
National listing inventory continued to decline in September, posting a 2.5% year-to-year decrease – a faster rate of decline compared to August’s 1.8% decrease.
Driven by strong demand and short supply, entry-level homes priced below $200,000 have been steadily decreasing since May 2014, a trend that continued in September with a yearly decline of 9.8%. Mid-market homes priced between $200,000 and $750,000 – the largest segment of inventory – flatlined in September with 0% growth , and they’re poised for their first decline next month.
“Buyers looking for their next home have faced the headwinds of tight inventory and a competitive market this year,” says George Ratiu, senior economist for realtor.com. “While lower mortgage rates and the arrival of fall promised a reprieve, conditions continue to tighten as demand remains strong. September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020.”
Finding an affordable home has been a challenge for buyers in recent years, but mid-market inventory in particular has seen some relief in the last year and a half. But this month’s data shows that recovery has halted, which should translate into increased competition for move-up buyers – not just first-time buyers.
“The mid-tier of housing represents nearly 60% of homes for sale on the market, making it a solid indicator of how tight inventory levels are in the U.S.,” says Ratiu. “After more than a year and a half of solid growth in this segment, we’re seeing inventory levels stall out and flat-line. If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of homebuyers are going to feel its effects as their options rapidly dwindle.”
Homes listed over $750,000 continued to grow by 4.7% year-over-year. However, if strong homebuying demand, fueled by lower interest rates, continues to persist into the fall, the inventory of homes in this upper-tier price range could also see declines by February of 2020.
Listing prices advertised through realtor.com continued to moderate in September. The median list price was $305,000 – 4.3% higher than this time a year ago. However, price growth is slower than last September, when the median list price grew by 7.3%.
The pace of sales also remained at near record highs. The median age of properties on realtor.com in September reached 65 days. The typical property spent one more day on the market year-to-year and two more days month-to-month, though the latter number is generally considered a normal trend as summer turns into fall.
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