According to the National Association of REALTORS® (NAR), there is currently a 3.9 month supply of for-sale inventory nationwide. (A “healthy” market is considered to be one in which there is a 6-month supply of inventory.) Such declining inventory has been going on for the last five consecutive months.
Inventory for the low-end of the housing market, homes priced from $100,000 and $250,000, is worse than the overall market. Inventory within this price point has dropped -6% from one year ago and inventory of homes prices below $100,000 has dropped -15% compared with last year at this time. Inventory for “move-up” homes, or homes priced from $250,000-$750,000, has decreased only -1% annually.
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According to Zillow economist Mathew Speakman, “A lack of entry-level homes means newcomers to the (housing) market can have a hard time getting a foothold. They and other budget-conscious shoppers shy away from prices in many of the country’s most populous areas, creating a nation of would-be home buyers who share a preternatural patience in waiting for the right home to come alone.”
Check out some of these metros with declining inventories:
- Seattle – -28%
- Portland – -16%
- Cincinnati – -18%
- Pittsburgh – -16%
- Washington DC – -17%
- Austin – -14%
- Louis – -15%
- Kansas City – -16%
- Phoenix – -15%
As you can see, this recent run on housing in the Midwest has been due to affordability and job growth in “unexpected” tech centers such as Pittsburgh and Kansas City. Additionally, “…the fastest growing metros now are mid-sized and smaller metros in the Sunbelt,” said Jed Kilko, chief economist with Indeed.
The obvious result of housing supply drops is increasing house prices. The national median price has increased more than +6% compared to one year ago. This is the highest annual growth rate in over two years, according to realtor.com.
Of course, lower interest rates also fuel prices as demand continues to outstrip supply.
Why is inventory taking such a hit?
- Rising wages, low interest rates, and pent-up demand translate into NO housing.
- New construction levels have been “disappointing” due to increased costs for land, labor and materials.
- Extended home tenure.
- Migration levels have dipped to levels not seen since World War II.
Thanks to Zillow, realtor.com, Indeed, Oxford Economics and CNBC for source data.