By Michele Lerner (washingtonpost.com)
Even as the U.S. housing market appears to be returning to a more normal, pre-pandemic pace and fewer bidding wars, it continues to be tight. The main reason: a severe lack of homes to buy.
Earlier this year, Realtor.com estimated the gap between the number of homes needed and the number of homes available at 5.24 million. That estimate in June represented an increase of 1.4 million above the estimated 3.84 million gap in 2019, primarily because residential construction hasn’t kept up with household formations.
From January 2012 to June 2021, 12.3 million new American households were formed, but just 7 million new single-family houses were built, according to Realtor.com.
The housing shortage is particularly acute in the more-affordable range. Newly built houses with a median sales price of $300,000 represented just 32 percent of builder sales in the first half of 2021, compared with 43 percent during the first half of 2018, according to Realtor.com. To close the gap between demand and supply, builders would need to double their pace of construction for five or six years, Realtor.com economists estimate.
That shortage contributes to the continued fast pace of sales. A recent report by the Redfin real estate brokerage found that, during the four weeks that ended Oct. 17, one-third of homes in over 400 metro areas went under contract within one week of being listed.
That’s a bit more than the 30 percent of homes that sold that fast during the same period last year, and far more than the 20 percent that sold that fast in the same period in 2019, before the pandemic influenced seasonal buying patterns.
More homes came on the market this summer, but demand for homes is still high and listings are still low compared with previous years, according to Redfin. Active listings, which are all homes on the market during a specific period, fell 22 percent in the four weeks that ended Oct. 17 compared with the same period in 2020. Sales were down 40 percent compared with 2019.
The median sales price, according to the Redfin report, jumped 13 percent during the four weeks that ended Oct. 17 compared with that period in 2020, to $355,875. That’s a 29 percent increase over the same period in 2019.
Despite the quick pace of sales and rising prices, one indication that the housing market may be returning to slightly more-normal fall conditions is that bidding wars are becoming somewhat less common. Redfin reports that 58.9 percent of offers written in September by its agents faced competition, the lowest percentage in 2021. Bidding wars hit a peak of 74.3 percent in April.
In September, bidding wars were highest in Raleigh, N.C., where 73.9 percent of buyers faced competition, followed by Boston (71.7 percent) and Indianapolis (71.4 percent).
In the D.C. metro area, which ranked 24 out of the 45 metro areas analyzed by Redfin, 56.3 percent of buyers faced competition compared with 55 percent in the previous month and 66.7 percent in September 2020.