The law of supply and demand is on full display in the housing market right now, as the ongoing shortage of available homes for sale is coupling with a surge of homebuyers to push home prices up at the fastest rate in years, according to Redfin.
Despite buyers coming out of winter hibernation earlier than usual, sellers are few and far between these days, Redfin said.
In fact, there were only 1.4 million units available for sale in December, the lowest level in at least 20 years, according to the National Association of Realtors.
Beyond that, December saw the largest year-over-year decline of housing inventory in almost three years, with inventory declining 12%, according to realtor.com.
This is heating up the homebuying competition early in the new year.
Also contributing to the stiff competition is lower mortgage rates – which are now the second-lowest they have been in three years. That’s driving some buyers into the market, but also contributing to many others holding onto their homes, happy to have their newly refinanced mortgage.
“With every new release of data this year, I’m becoming more and more confident that demand will be strong in 2020—just as strong as, if not stronger than, in 2018 and 2017,” said Redfin chief economist Daryl Fairweather. “The big question for the housing market this year is supply. Will homeowners sit on the sidelines, content with their refinanced loans, or will they want to get in on the action too and move up, move down, or cash out entirely?”
A rise in bidding wars and a continuous spike in home prices may soon be the result of a 10-year peak in homebuying demand and 20-year low in the number of homes for sale.
“New construction is beginning to pick up in some markets though, so even without new listings of existing homes there will be some relief for homebuyers hoping for more selection,” Fairweather continued. “However, due to the high cost of acquiring and developing land in expensive coastal cities, much of that new construction will be built far away from urban centers or in already affordable metros.”
In all, if this year’s early rise in homebuying demand signal anything about the 11 months left in the year, 2020 may turn out to be the most robust housing market in nearly a decade, Redfin said.
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