By Alex Veiga
Associated Press
Anyone eager to buy a home this spring probably has reasons to feel good. The job market is solid. Average pay is rising. And mortgage rates, even after edging up of late, are still near historic lows.
And then there’s the bad news: Just try to find a house.
The national supply of homes for sale hasn’t been this thin in nearly 20 years.
And over the past year, the steepest drop in supply has occurred among homes that are typically most affordable for first-time buyers and in markets where prices have risen sharply.
“Sellers will have the edge again this year,” said Ralph McLaughlin, chief economist for Trulia, a real estate data provider.
Data provided to the Associated Press by Trulia show that the inventory of houses on the market has diminished since 2012 in 96 of the 100 largest U.S. cities — including Ohio’s six largest cities.
In the Buckeye State, the inventory shrinkage has been smallest in Akron, with a 24.9 percent decline in figures tabulated for the first three months of each year from 2012 to 2017. The city ranked 32nd nationally in lowest percentage decline.
Similar inventory declines were recorded in Toledo (No. 34 at 26 percent), Cleveland (No. 35 at 26.8 percent) and Cincinnati (No. 42 at 30.2 percent).
The market tightening was more prominent in Dayton, where inventories declined 43.2 percent (64th) over the six years, and Columbus, which declined 54.8 percent (78th).
Trulia’s data show that, on average, 2,552 houses were up for sale in the first three months of this year — down from 3,399 over the same period six years ago.
And while buyers have fewer options, some parts of Greater Akron still offer dozens of possibilities.
Data for February from Realtor.com, broken down by ZIP code, show that 44313 (Highland Square, Wallhaven and Northwest Akron) and 44312 (Ellet and Springfield) led the way for single-family houses and condominiums on the market with 129 each.
About 1.75 million homes were for sale nationally at the end of February, according to the National Association of Realtors. That’s down 6.4 percent from a year earlier and only slightly up from January, when listings reached their lowest point since the association began tracking them in 1999. All told, the supply of homes for sale has fallen on an annual basis for the past 21 months.
The intensity of the competition this spring has surprised even sellers like Kathleen Mulcahy, a 37-year-old product manager in Seattle.
Within a week of listing her one-bedroom, one-bath condo, Mulcahy received 21 offers — all above her asking price of $398,000. Most of the offers came with built-in triggers to automatically rise in case a rival bidder sweetened a bid. In the end, she accepted an offer of $500,000 — all cash.
“A lot more than I expected,” Mulcahy said.
Yet the changed landscape cuts both ways: Facing higher prices and competition herself, Mulcahy has decided for now to put off buying another home.
“There’s very little available, and it’s just too expensive right now, so I’m going to wait,” she said. “I’ll probably rent for two or three years.”
Factors fueling decline
Among the factors that have fueled the decline in homes for sale:
• Since 2008, the average time homeowners have stayed in their houses before selling has doubled to nearly eight years, according to Attom Data Solutions.
• Many homeowners aren’t selling for fear they wouldn’t find a new home they would like and could afford. Some who had locked in ultralow fixed mortgage rates may be reluctant to take on a new loan at a higher rate. Others may wish to sell but can’t because they own one of the 3.2 million homes worth less than what’s owed on their mortgage.
• Some homeowners own other properties they rent out and have little incentive to give up the steady rental income, especially while they’re also benefiting from rising home values.
• Investors, who typically keep properties for disproportionately long periods, own a larger share of houses. Between 2006 and 2016, the share of U.S. single-family houses and condos owned by investors averaged around 30 percent, according to Attom, and reached 35 percent last year.
Nor are builders replenishing the stock of new homes fast enough. Though the pace of building has been rising, it has yet to make up for years of sluggish construction growth that followed the housing bust. Builders complain that they can’t build more homes because of a lack of ready-to-build land, costly regulations and a chronic shortage of skilled construction workers.
“We’re building homes now at 65 percent of the rate we have historically,” McLaughlin said. “The long-term solution to this scenario is building new homes.”
Sales increase likely
Despite the scant supply, U.S. home sales are expected to rise this year, economists say. Fueled by job growth, pay raises and still-low loan rates — and perhaps fearful of being left out as more homes are snapped up and prices rise further — many people are looking to buy.
Sales of previously occupied U.S. homes surged 5.4 percent in February from a year earlier, according to the NAR. In January 2016, 16.5 percent of the homes on the market were sold. This January, it was 19 percent, according to Trulia.
As prices have risen in response, so have the financial obstacles to homeownership. The median sales price has surged 7.7 percent from a year ago to $228,400, more than double the pace of average pay gains. And qualifying for increasingly expensive homes will become even harder should mortgage rates continue to rise this year, as many economists predict. The average rate on a 30-year, fixed-rate mortgage recently hit 4.1 percent; last year, it averaged 3.65.
The homes that are on the market are less affordable to a growing proportion of the population, according to research from Realtor.com. Entry-level buyers will likely have the most difficulty finding a home they can afford this spring.
Nationally, the supply of entry-level homes for sale has declined the most from a year ago — down 8.7 percent in the first quarter, according to Trulia. The supply of move-up homes is down 7.9 percent. By contrast, the supply of high-end homes has slipped just 1.7 percent from a year ago.