The coronavirus recession has skewed the supply and demand curve for housing: Buyers are still buying, but sellers aren’t selling.
The result? Too few homes for sale, and stiff competition among buyers. Nationally, there was just a four-month supply of homes for sale in June, a figure Lawrence Yun, chief economist at the National Association of Realtors, describes as “a significant shortage.”
In California, the situation is more extreme — a mere 2.7-month supply of homes for sale in June, a number far below the six-month benchmark that favors neither buyers nor sellers.
The coronavirus reduced the number of home sales nationally. In California, the number of homes sold fell 13 percent from June 2019 to June 2020. But there’s a twist: The number of homes on the market plunged by 43 percent.
“We saw a big contraction,” says Jordan Levine, deputy chief economist at the California Association of Realtors. “California had one of the biggest declines in active listings we’ve seen in many years.”
Housing economists point to a couple of reasons that the shortage is especially acute in the Golden State: California had a more restrictive lockdown than other states, leaving sellers reluctant to market their homes.
“Homeowners don’t want people traipsing through their homes, and they don’t want caravans of Realtors coming through their homes, either,” says Alan Nevin, director of economic and market research at Xpera Group in San Diego.
Even as supply is constrained, demand remains comparatively strong. The highly paid workers who can afford California homes have taken only a glancing blow from this recession, Nevin says. While overall unemployment has jumped into double digits, the jobless rate for Californians with college degrees is just 6 percent.
As a result, San Diego County has a paltry 1.3-month supply of single-family houses and a 1.7-month supply of condos and townhouses.
The situation isn’t quite so stark in Northern California, but the Bay Area also is seeing a shortage of homes for sale.
“We’re way, way down,” says Bill Aboumrad, owner of Legacy Real Estate & Associates in Fremont. “This inventory is even lower than the inventory we had during the last big boom.”
That means multiple offers and bidding wars. Aboumrad notes one recent listing priced at $649,000; it sold for $702,000. Another home listed at $1.15 million sold for $1.23 million.
While homes in Northern California are fetching up to $100,000 over their asking prices, it’s worth noting just how expensive homes are in the Bay Area.
“Anything under $1 million is really hot in our market,” Aboumrad says.
California isn’t the only place with a shortage of homes, of course. Realtors across the country have reported dozens of bids for a single property.
Realtor.com finds sharp declines in the number of homes for sale in many parts of the country. Through late July, active listings were off 61 percent in Fresno, California, 60 percent in Allentown, Pennsylvania, 53 percent in Boise, Idaho, and 52 percent in Salt Lake City. Baltimore, Cincinnati, Philadelphia and Louisville, Kentucky all saw declines in inventory of 45 percent or more.
The new reality has Realtors resorting to letter-writing campaigns in an effort to pry loose some inventory. And buyers find themselves scrambling to make bids — and usually losing out.
“It’s frustrating for the buyers,” Aboumrad says. “They just don’t know what to do.”
The scramble for housing and the instinct to nest is just one of the strange results of the pandemic.
“Homes are more important than ever now that people are spending more time in their homes,” Levine says.
He expects sellers to ultimately take advantage of favorable conditions by putting for-sale signs on their properties. In the meantime, a shortage of homes has only gotten worse.
“California had a chronic supply crisis,” Levine says, “even before this pandemic.”
For now, it’s a seller’s market in much of the nation. If you’re shopping for a home, here’s how you can navigate atypical conditions: