The U.S. housing market is presenting a study in contrast. On one hand, houses sell almost as fast as they go on the market. On the other hand, the number of sales continues to fall.
How can that be? It’s simple. There is huge, pent-up demand for homes but not nearly enough home listings to satisfy that demand.
As a result, sale prices continue to rise. In the four-week period ending May 16, real estate broker Redfin reports its home prices hit a record high of $352,975 and were up 24% year over year, also a record. In yet another record, asking prices increased to $358,975.
Remarkably, 50% of Redfin’s listings that went under contract during that time sold for more than the seller’s asking price, evidence of just how competitive the market has become.
Not enough listings
Despite the hyper-competitive market, the National Association of Realtors (NAR) reports sales of existing homes in April declined 2.7% from March as the number of listings dried up. It marked the third straight month of a sales decline, suggesting that even surging prices have not lured more sellers into the market.
"We'll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes,” said Lawrence Yun, NAR's chief economist. “The falling number of homeowners in mortgage forbearance will also bring about more inventory.”
Yun is quick to point out that falling sales are not the result of a lack of buyers. He says more listings on the market would lead to a pick-up in sales and make the market a bit friendlier to buyers. But for now, it’s a challenging time for people trying to buy a home.
Challenges for first-time buyers
"First-time buyers, in particular, are having trouble securing that first home for a multitude of reasons, including not enough affordable properties, competition with cash buyers, and properties leaving the market at such a rapid pace," Yun said.
NAR’s price data shows a lower median home price than Redfin’s, but prices are rising nonetheless. The median existing-home price for all housing types in April was $341,600, up 19.1% from April 2020, as every region recorded price increases. It was a record high and marks 110 straight months of year-over-year gains.
Both NAR and Redfin found homes were selling at the same rapid pace. Properties typically remained on the market for 17 days in April, down from 18 days in March and from 27 days in April 2020.
Eighty-eight percent of the homes sold in April 2021 were on the market for less than a month.