The housing inventory in the U.S. continues to decline, once again dropping to an all-time low in March 2021. According to the National Association of Realtors (NAR), the number of existing home listings fell by 25.7%, compared to the same month last year. This marks the lowest level of inventory since the association began tracking data in 1999.
The unprecedented decrease in supply has caused housing prices to rise significantly. The sale prices of existing single-family homes rose to an average of $330,400 in March 2021, up 16.2% from last year. This marks the strongest year-over-year gain since 2005. The number of closed transactions is also up, with NAR reporting a 20% increase in sales of existing homes year-over-year.
The housing inventory shortage is largely due to the combination of record-low mortgage rates and limited supply of new homes. As of April 2021, 30-year mortgage rates have remained below 3% for eleven consecutive weeks. To make matters worse, the National Association of Home Builders has reported a 9% year-over-year decrease in the number of new construction permits – one of the lowest levels since the association began tracking data.
The nationwide shortage of inventory has put prospective homebuyers in a tough spot. Many buyers are struggling to find a home in their desired price range and location, and some are having to compete with multiple buyers for the same home. With home prices on the rise, this could cause affordability issues that could potentially lead to a housing crisis in the future. While the housing market looks good for now, it’s important for policymakers, homebuilders, and lenders to work together to combat the shortage of inventory and ensure that prospective buyers are able to find a suitable home at a reasonable price.
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