Zillow's study shows a surge of new listings could lessen frustrations for homebuyers.
The housing market has been experiencing an inventory crisis as homebuyers are hungry for more homes than are available for sale. Horror stories are mounting of buyers paying thousands…even hundreds of thousands above asking price.
But an incoming surge of new real estate listings could change today’s inventory crisis.
New data in Zillow’s Monthly Market Report suggests the inventory crunch bedeviling home searchers may be starting to turn around as record appreciation of home values makes it more enticing to sell.
Although continued demand for homes pushed total for-sale inventory down 1.1 percent in March, the monthly decline was the smallest seen since July, Zillow’s report shows. That’s thanks to a rush of new inventory (rising 30 percent from late February to late March), which signals sellers are following the traditional pattern of listing their homes in spring. Over the three months, inventory has dropped by about 8 percent each month.
“March often sees a boost in inventory, and then return to some seasonal norms is a positive sign that supply is beginning to catch up with demand,” Zillow Economist Treh Manhertz said. “With home values skyrocketing, vaccination rates rising and employees getting long-term guidance on where they can work, we expect an increasing number of homeowners to join the market and list in the coming months. That will come as welcome news to home shoppers who are seeing bidding wars and homes plucked from the market weeks faster than usual.”
And home prices are rising at a record pace. In March, home prices rose a record 1.2 percent month over month to $276,717. This is the largest monthly rise in Zillow records going back to 1996 and a roughly $3,200 jump in value from February for the typical home. Annual appreciation rose to 10.6 percent, the largest jump in 15 years.
Zillow economists forecast 6.4 million homes will sell in 2021 – up 13.5 percent from 2020 and the strongest year for sales since 2006 – and expect home values to rise 10.4 percent over the next 12 months.
The Mortgage Bankers Association also expects homebuying to pick up, forecasting that the mortgage market will see record originations on the purchase side this year. The MBA announced Thursday at its Spring Conference and Expo 2021 that purchase originations are on track to grow 16.4 percent to a new record of $1.67 trillion in 2021.
In their most recent forecast, Fannie Mae and Freddie Mac said the housing market is about to face a slowdown due to decreased refinances driven by higher interest rates, but they each predicted a strong increase in purchases. That means the two mortgage giants expect to see a lot more home buyers enter the market in 2021.
By Kelsey Ramirez