It’s no wonder that the number of homes for sale is dwindling. According to the National Association of Realtors, home sales surged 14.5% in February compared to January. This was the first monthly gain in 12 months and the highest increase since the start of the Covid-19 pandemic in July 2020.
Simultaneously, higher mortgage rates have been driving down home prices since last summer. For the first time in a record 131 months, prices were lower on a year-over-year comparison. However, the sales counts are based on closings, so the contracts were likely signed when mortgage rates had dramatically fallen at the end of December and throughout January.
This trend is especially evident in the Midwest. I have been keeping an eye on the number of homes for sale in my area for many years now. During normal times, the area usually had about 60-80 homes for sale without any contingencies (no accepted offers). But in the past few years, that number has been steadily decreasing. Last week there were only four homes available. And today, there is exactly one home for sale. Even then, the home is over $700K, while the average in this area is closer to $200K.
The same was true during the 2008 crash. While places like Phoenix and Las Vegas saw massive 25%-30% average transaction price declines, places like New York and Connecticut saw 3%-5% average transaction price declines. Even some parts of California, a notoriously expensive area, saw 5%-10% declines.
It’s clear that the real estate market is highly volatile and unpredictable. As more people look to purchase homes, the number of homes available will continue to drop. This means that buyers need to act fast to get the best deals.