Low Inventory Impact on the 2020 Fall Real Estate Market
How Low Inventory is Impacting the Housing Market This Fall
Real estate in many places continues to be called the ‘bright spot’ in the current local economy, but there’s one thing that may hold the housing market back from achieving its full potential this year: It’s the lack of homes for sale. In West Hartford, CT the supply of homes for sale last year in September 2019 was 250 (+/-) single family homes actively on the market. This year September 2020 there are only 115 active single family homes for sale. A 54% decline of available homes for sale. This has placed a great deal of pricing pressure to the upside in this years market; many home owners this year are receiving multiple offers, with homes going over asking, or buyers dropping inspections and buying the homes AS IS to win the bidding. Home are selling in a shorter period of time. The Average days on the market in West Hartford Sept 2020 is now running 29 days which is down 45% from 54 days in September 2019. The Average Sale price in September 2019 for a single family home was $335,653. This September 2020 the average home price is running $390,332 an increase of 16.3 percent compared to last year at this time.
Buyers are actively searching for and purchasing homes, looking to capitalize on today’s historically low interest rates, but there just aren’t enough houses for sale to meet that growing need. Sam Khater, Chief Economist at Freddie Mac, explains:
“Mortgage rates have hit another record low due to a late summer slowdown in the economic recovery…These low rates have ignited robust purchase demand activity…However, heading into the fall it will be difficult to sustain the growth momentum in purchases because the lack of supply is already exhibiting a constraint on sales activity.”
According to the National Association of Realtors (NAR), right now, unsold inventory sits at a 3.1-month supply at the current sales pace. To have a balanced market where there are enough homes for sale to meet buyer demand, the market needs inventory for 6 months. Today, we’re nowhere near where that number needs to be. If the trend continues, it will get even harder to find homes to purchase this fall, and that may slow down potential buyers. Danielle Hale, Chief Economist at realtor.com, notes:
“The overall lack of sustained new listings growth could put a dent in fall home sales despite high interest from home shoppers, because new listings are key to home sales.”
The realtor.com Weekly Recovery Report keeps an eye on the number of listings coming into the market (houses available for sale) and the total number of listings staying in the market compared to the previous year (See graph below):Buyers are clearly scooping up homes faster than they’re being put up for sale. The number of total listings (the orange line) continues to decline even as new listings (the blue line) are coming to the market. Why? Javier Vivas, Director of Economic Research at realtor.com, notes:
“The post-pandemic period has brought a record number of homebuyers back into the market, but it’s also failed to bring a consistent number of sellers back. Homes are selling faster, and sales are still on an upward trend, but rapidly disappearing inventory also means more home shoppers are being priced out. If we don’t see material improvement to supply in the next few weeks, we could see the number of transactions begin to dwindle again even as the lineup of buyers continues to grow.”
Does this mean it’s a good time to sell?
Yes. If you’re thinking about selling your house, this fall is a great time to make it happen. There are plenty of buyers looking for homes to purchase because they want to take advantage of low interest rates. Many Realtors are also reporting an average of 3 offers per house and an increase in bidding wars, meaning the demand is there and the opportunity to sell for the most favorable terms is in your favor as a seller.
If you’re considering selling your house, this is the perfect time to connect so we can talk about how you can benefit from the market trends in the Greater Hartford area.