The number of homes available for sale is finally improving, providing some hope for buyers burned out by an extremely competitive market.
During the week ending May 21, the inventory of homes for sale was 9% higher compared to the same week last year, according to new data from Realtor.com. That’s the largest year-over-year increase the listing site has recorded since it started tracking inventory in 2017. Encouragingly, it was also the second straight week of supply growth.
The inventory improvement is due in part to new listings, as well as to a fewer home sales.
The number of homes to hit the market was 6.6% higher last week than during the same period a year ago, according to Realtor.com’s data. Meanwhile, about 6% fewer existing homes sold last month than in April 2021, according to the National Association of Realtors. That means more inventory is still available.
“The real estate refresh continues, building on the past two weeks of momentum with active listings’ biggest year-over-year jump in our data history. And as the number of new sellers also keeps rising, last week’s data suggests that more increases may be ahead,” said Danielle Hale, Realtor.com’s chief economist, in a statement.
Before adding, “Recent inventory improvements are expected to eventually tip market conditions in a more buyer-friendly direction, and one we expect to provide relief from surging asking prices later in the year.”
There is still a lot of room for improvement
While the recent increase in housing supply is good news, it will take a long time for the market to dig out of the inventory crisis that has been brewing since the housing crash and has been made worse by the pandemic.
Low mortgage rates, the desire for social distancing and the move toward remote work, led to a surge in housing demand starting in 2020 that is still going strong today. At the same time, many homeowners were able to refinance at low rates and were nervous about becoming buyers, keeping them from selling.
There is a long way to go before there is enough supply to satisfy buyer demand. A healthy housing market is one where there is a 6-month supply of homes for sale. NAR estimates there is currently a 2.2 month supply of existing homes at the current pace of sales — better than a year or so ago but still pretty low.
In a recent survey of real estate agents, a whopping 71% said low inventory was the main obstacle to homeownership today. More than 50% of the agents surveyed by real estate tech company OJO Labs estimated their clients had to submit an average of 2 to 5 offers before having one accepted, with most of the rest saying their clients had to make five or more offers.
Low housing supply also affects home prices and pace of sales, and the prolonged drought in inventory has led to one of the most competitive housing markets in years. Asking prices have been 10% or more above the previous year’s for the past 23 weeks, while homes are selling six days faster compared last year, according to Realtor.com.