Blink and you’ll miss your dream home. So few single-family homes are for sale in America that just two months of inventory is available across the top 100 metro areas in the country, a historic low.
That’s according to Black Knight, which just released a white paper that studies how long it would take to sell all the homes currently listed for sale in a given market based on a prevailing sales rate, if no new listings are added (a metric it calls “months of remaining inventory”).
“Historically, markets maintaining four to six months of inventory would have been defined as being in equilibrium,” said Michael Sklarz, managing director of the Collateral Analytics division of Black Knight.
“Not only have overall months of remaining inventory figures converged toward less than two months in recent years, but higher-priced homes – which have historically required substantially more time to sell – have been in increasingly short supply.”
“Higher priced” homes in hot housing markets in cities such as Los Angeles, Palm Beach and Phoenix are also increasingly in short supply, the report’s authors found. Prior to 2020, “higher priced homes” was generally considered to be anything over $1 million.
In markets like San Diego and Los Angeles, any listing under $3 million on average takes less than three months to sell. In Dallas, listings under $2 million have less than three months of inventory. Historically, it took these thin markets anywhere from six to 12 months to sell listed inventory.
Less than 10% of all markets fall under the category of “hot” or distressed, even at the top or bottom of normal cycles, the report said. For early 2022, 16% of the market was labeled “hot,” using data from May 2022.
Recent advances in information technology which dramatically reduced the time it takes to find and buy a home and the Federal Reserve’s fiscal policy of raising interest rates which gives no incentive to sell and give up homes that were refinanced at low rates were factors that contributed to reduced home inventory.
According to the report, institutional investors that jumped into the single-family properties market following the housing market crash in 2007 to convert them to rentals also played a role.
“This proved to be a profitable business model but served to reduce home inventory,” said Sklarz. “The addition of iBuyers in recent years has only increased investor demand. In 2022 to date, a significant percentage of the homes in the bottom half of the price range, especially in the less-dense suburbs, are being purchased by single-family rental investors.”
While it is unknown how long the housing market will remain in a state of seller paralysis, buyers will need to enhance their search and offer strategies to the extent that low inventories become the new normal, Sklarz added.
“Agents and brokers will need to become adept at using technology – on both sides of the purchase transaction – to ensure they are providing buyers and sellers with the most current and accurate information.”
The inventory of homes for sale rose 8% over the last year in May, marking the first rebound since June 2019. Compared to May 2020, the inventory of active listings was down 48.5%, meaning there are still only half as many homes available, according to Realtor.com‘s monthly report. The median national home price also climbed to an all-time high of $447,00 last month, jumping 35.4% year over year.