Spring inventory: ‘Buyers can’t buy if sellers don’t want to sell’
Even as falling interest rates have opened the door for more buyers, not enough sellers are listing, keeping inventory stubbornly low.
- Several reports indicate that new listings are down, even compared to the pandemic lockdown-era of March 2020.
- New listings in spring are a strong indicator of what sales numbers will look like this summer.
- Some markets are starting to see an uptick in new home listings, but they haven’t reached pre-pandemic levels.
As the spring real estate market data rolls in, one thing is clear: There just aren't enough homes for sale.
Many of the reports indicate new listings are well below last year's pace, which was also a year marked by low inventory. In its monthly report for March, Zillow estimates new listings were down 22.3% compared to March 2022. Even more concerning is that new listings are down 20.2% compared to March 2020, a time when much of the country was shutting down with the onset of Covid-19.
"It means buyers have very few fresh options to consider on any given weekend this spring," Zillow Senior Economist Jeff Tucker said in the report.
New listing totals in the spring tend to be a strong indicator of what will happen later in the year, said George Ratiu, chief economist at Keeping Current Matters, adding that new listings generally lead sales by four to five weeks.
"Spring is a critical period for housing markets because it accounts for the largest share of new listings coming to market," Ratiu said in an email, noting that March, April, and May historically account for 29% of new listings each year.
The impact of low inventory is showing up in pending home sales. According to Redfin, pending sales are down 19% year-over-year, which is about the same as Redfin's estimate of the year-over-year drop in new listings (21.8%).
"Elevated mortgage rates are perhaps an even bigger deterrent for would-be sellers than for would-be buyers. Giving up a 3% mortgage rate for one in the 6% range is a tough pill to swallow," said Redfin Deputy Chief Economist Taylor Marr. "The lack of homes hitting the market explains why the market is moving fast even though sales are still down. The lack of new listings is also one reason why sales are down: Buyers can't buy if sellers don't want to sell."
Some markets seeing inventory return
Inventory levels continue to vary in local markets. In Houston, new listings are up 3.7% compared to a year ago but down 6% when compared to March 2019, according to the Houston Association of Realtors.
In Washington state, brokers added 7,904 new listings during March across the 26 counties, according to the Northwest MLS. That's down nearly 30% year-over-year, but is up 51% from February.
"Despite the year-over-year comparisons showing declines, the year-to-date trends indicate the market is moving in a positive direction, towards a healthy market, albeit at a lower velocity than last year," said John Deely, executive vice president of operations at Coldwell Banker Bain.
In Austin, Texas, overall inventory is starting to pile up, according to the Redfin report. The city, once a popular pandemic spot for homebuyers, now has 4.4 months of supply, more than almost anywhere in the country, according to the report. That's also led to a price drop of nearly 15% year over year.
"Buyers have more power right now. The silver lining of high rates and the slow market we've been experiencing here is that some locals are able to buy in neighborhoods they couldn't have gotten into last year and get contingent offers with small down payments accepted," said Austin Redfin agent Andrew Vallejo. "But attractive homes that are priced competitively are selling quickly. Sellers are starting to notice, and they're prepping and pricing their homes accordingly. I think we'll start to see more listings over the next several months."