The number of for-sale homes reached an all-time low in December as buyers — spurred by historically low mortgage rates — remain undeterred even in a pandemic.
There were 449,000 fewer homes on the market last month —a drop of 36.9% from December 2019 — marking the first time that active listings fell below 700,000, according to Realtor.com’s monthly housing trends report.
“Demand for homes remains strong,” said George Raitu, senior economist at Realtor.com, “even as winter sets in, a sharp departure from historical seasonal trends.”
The low inventory is pushing prices higher — erasing much of the savings from record low mortgage rates — and making it harder for buyers to get a deal.
‘More competition from other potential buyers’
The median listing price increased 13.4% over last year to $340,000, according to Realtor.com data. Large metros saw an average price gain of 8.8% versus last year.
“Unfortunately, fewer homes for sale can make it difficult for homeowners to find a home that they are looking for,” said Selma Hepp, deputy chief economist at CoreLogic, a real estate analytics firm. “Also, in a limited supply environment, homebuyers are often facing more competition from other potential buyers, which may lead to faster acceleration in home prices as home buyers bid up their offers in an attempt to secure a contract.”
That price acceleration erodes the benefit of historically low rates, too. The rate on the 30-year fixed mortgage reached 2.65% this week, according to Freddie Mac, a government agency that backs millions of mortgages. That’s down from 2.67% last week and down from the prior low of 2.66% set on Dec. 24.
“Even with lower mortgage rates, prices rising by double-digits are starting to dampen affordability,” Raitu said, “especially for younger and first-time buyers.”
Low inventory will continue throughout 2021
Seller activity was closer to normal in December, with new listings down only 0.8% from 2019, compared with a 8.7% year-over-year drop in November. But buyers remained aggressive, scooping up homes quickly. The typical for-sale home stayed on the market for 66 days in December, 13 days less than last year, according to Realtor.com.
More of the same is on the way, one expert said, with more record low inventory levels occurring in the future.
“The shortage of homes for sale has been an ongoing issue for the last couple of years, but in December, the combination of the holiday inventory slowdown and the pandemic buying trend caused it to dip to its lowest level in history,” said Danielle hale, chief economist at Realtor.com.
“Looking forward, we could see new lows in the next couple of months as buyers remain relatively active,” she added, “but a surge of new COVID cases may slow the number of sellers entering the market.”