People wait to visit a house for sale in Floral Park, Nassau County, New York.
Wang Ying | Xinhua News Agency | Getty Images
The spring housing market is shaping up to be the leanest and most competitive ever.
A sharp drop in new listings partly due to severe weather, combined with already record-low supply, will make it increasingly difficult for buyers to find their dream home at the perfect price.
There were nearly half as many homes for sale at the end of February, compared with the same period a year earlier, according to a new calculation by realtor.com. Low supply was exacerbated by a drop in the number of new listings to come on the market.
“Last month’s record cold and snowstorms likely caused sellers to hit pause, even if only temporarily,” said Danielle Hale, chief economist at realtor.com. “However, in today’s inventory-starved market, any setback is significant.”
A pullback by sellers resulted in roughly 207,000 fewer homes newly listed for sale in the first two months of this year compared with the average for that time period over the last four years. In order to catch up, new listings would have to grow by 25% annually in March and April, which is unlikely.
While the biggest drops in new supply were in Oklahoma City and Kansas City, Missouri, declines were widespread across the country. The only major cities seeing gains in inventory were San Jose and San Francisco in California, and Denver, Colorado.
The increasingly tight supply of homes for sale continues to fuel the fire under home prices. In January, prices were up just over 10% year over year, according to CoreLogic. Rising mortgage rates are now hurting affordability, but so far have not thrown any cold water on home prices.
The tight supply has only made sellers more bullish on their potential gains. Asking prices of newly listed homes hit an all-time high of $347,475 in February, according to Redfin.
Sellers have plenty of reason to feel confident, as Redfin also found that just over half (55%) of homes that went under contract in February did so within their first two weeks on the market. That share was 44% a year ago.
“Over the last few weeks winter storms have disrupted the housing market, and mortgage rates have risen sharply,” said Daryl Fairweather, Redfin’s chief economist. “Although pending sales and new listings have taken a small hit in the last couple of weeks, home price gains are showing no signs of slowing down.”
While the effects of the winter storms should be temporary, higher mortgage rates will cut further into affordability and could mean fewer bidding wars as the spring market progresses.