The number of homes for sale was hovering around record lows before the coronavirus pandemic hit the United States. Now, amid a public health and economic disaster, inventory is falling even further, just before what would typically be the busy spring buying season.
The number of homes for sale nationally dropped 15.7% in March compared with a year earlier, according to a recent realtor.com® analysis of active listings. That’s about 191,000 fewer homes for buyers. (Realtor.com looked at the 50 largest metropolitan areas to identify which saw the largest annual drops in homes for sale.)
However, the massive inventory declines aren’t all due to sellers pulling properties due to fears about COVID-19, the disease caused by the novel coronavirus. The number of active listings decreased 15.3% year over year in February and 13.6% in January, according to realtor.com. Under-building, more millennials seeking homes to house their growing families, and a sea of down-sizers have contributed to the crunch.
“The U.S. housing market had a good start to the year. Despite still-limited homes for sale, buyers were buying and builders were building,” realtor.com Chief Economist Danielle Hale said in a statement. “The pandemic and virus-fighting measures appear to be disrupting that initial momentum as both buyers and sellers adopt a more cautious posture.”
Meanwhile, list prices increased 3.8% in March, compared with the same month last year. The median list price was $320,000. However, price growth slowed in the past two weeks of March, around the time when the number of U.S. cases of infection rose and states began issuing shelter-in-place orders. In the third week of the month, the median list price was up 3.3%, and in the fourth week it rose just 2.5%.
The biggest drops in inventory were in the Phoenix metro area, where the number of homes for sale plunged 42.2% in March compared with the previous year. The median list price in the popular retirement destination was $405,000.
To be fair, the number of active home listings in Phoenix had dramatically fallen well before COVID-19 emerged as a major threat to America. Listings tumbled by the same 42.2% year over year in February, and declined 35.4% in January, according to realtor.com data.
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The culprit has been the influx of out-of-state buyers and a lack of new construction, says local real estate agent Kristy Ryan of Re/Max Fine Properties. Indeed, those new residents have made Phoenix the 10th largest metropolitan area, knocking Boston out of that spot, according to a recent U.S. Census Bureau report.
About half of Ryan’s clients are now from out of state, with many young professionals, families, and retirees hailing from ultrapricey California. A year earlier, these clients made up only about 20% to 25% of her business.
“Inventory was already disappearing. There’s not enough new building for the amount of people coming in,” says Ryan. “The Sun Belt is a desirable place to live with good weather. We have fairly low property tax rates.
“Our pricing is so great compared to California,” she adds.
Ironically, the coronavirus may result in a jump in the number of properties that go on the market in the Phoenix area. Folks are nervous about the stock market, which has been in a free fall, and the economy, which appears to be in a recession, and are putting their primary and secondary homes up for sale. Remembering how prices tanked during the Great Recession, sellers are eager to get top dollar while they still can, says Ryan.
“People are a little nervous that if there’s a whole financial meltdown from the coronavirus, that homes might lose value,” says Ryan. She’s seen more homes hit the market in the past two weeks or so, as the pandemic swept through the U.S.
The Phoenix metro area was followed by Milwaukee, with a 36.2% drop in inventory and a median list price of $327,500 in March. Next up was San Diego, at minus 33.4% and $750,000; Silicon Valley’s San Jose, CA, at minus 31.4% and $1,231,000; and Philadelphia, at minus 30.7% and $300,000.
The rest of the top 10 was rounded out by Cincinnati, at minus 30.4% and $300,000; Denver, at minus 30% and $560,000; Riverside, CA, at minus 27.6% and $425,000; Providence, RI, at minus 27.2% and $400,000; and Seattle, at minus 27.1% and $615,000.
In hard-hit New York City, inventory fell only 10.7% in the metro region. That was one of the smallest declines on our list. (The New York metro area encompasses suburbs and towns on Long Island and upstate New York as well as New Jersey, Connecticut, and Pennsylvania.) The median home price was $569,000.