Lack of inventory poses major obstacle to housing market recovery
While home-buying season was put on hold due to the coronavirus, a dearth in supply could hamper any big rebound in sales, according to Zillow.
The Weekly Market Report showed housing inventory dropped 17.1% from a year ago as of June 13 and an additional 0.4% from the week before. Among the top 35 metro areas covered by the report, for-sale supply fell annually as much as 36% in Seattle, 34.9% in Cleveland and 34.4% in Philadelphia. Only Atlanta and San Antonio posted rises at 1% and 0.1%, respectably.
"Homebuyers returned to the market earlier than might have been expected given the state of the economy, finding a market starved for inventory because of seller uncertainty. This improved demand has supported home prices and appears to have given sellers a confidence boost as new listings have slowly picked up," Skylar Olsen, senior principal economist at Zillow, said in a press release for the May Real Estate Market Report.
"The next question housing will face is whether this growth can continue after demand built up during housing's brief pause in the pandemic's early days runs its course,” she added. "It's likely housing will feel the broader economy's downturn eventually, though to a mild degree, and home values will fall in the coming months."
The Mortgage Bankers Association's latest forecast projects housing starts to dip to 1.18 million in 2020, compared to 1.3 million in 2019. The MBA predicted 1.26 million in 2021 and 1.4 million in 2022.
New listings fell 16.6% year-over-year and 3.8% from the prior week. They did, however, jump 13.9% month-over-month as more stay-at-home restrictions lift and people become more comfortable with selling and seeing homes.
Relatedly, pending sales rose 2.8% week-over-week and 17.7% from last month. Columbus, Ohio, had the highest weekly increase, with a growth of 18% in newly pending sales, followed by 16.8% in Sacramento, Calif., and 14.9% in Miami. Changes were more drastic month-to-month. Philadelphia shot up 62.7%, with New York trailing at 58.1% and Miami at 37.9%.