- Since March 2020, the number of homes available for sale has dropped from 600,000 to just 376,000.
- During the same period, the number of new real estate agents increased by 156,000 to more than 1.5 million.
On a sunny weekend in the Pico Rivera suburb of Los Angeles, more than 75 people lined up Lindsey Ave for the chance to see a three-bed, two-bathroom home that had just to be put up for sale for $575,000.
“It’s like that Hungry Hungry Hippo game in the 1980s, except there’s only one ball,” real estate expert Logan Mohtashami told Insider. “The sheer panic of needing a place to live hits everyone.”
—Logan Mohtashami (@LoganMohtashami) March 13, 2022
Mohtashami, a former mortgage broker and senior analyst for HousingWire, says lines like Lindsey Ave’s or the frenzy for a house in North Carolina are indicative of an unfolding inventory crisis in the United States.
U.S. housing stock had been slowly declining from its 2014 peak, until the pandemic sent the market into overdrive, pushing the number of monthly active listings from about 1 million two years ago to just 376,000 in February, according to the National Association of Realtors.
“At the end of the summer of 2020, I was like, ‘Oh my God, this is happening. Here’s the nightmare scenario,'” Mohtashami said. “Now that we are in 2022, people have finally realized this is a full-fledged national inventory crisis.”
Meanwhile, with fewer homes on the market, there are now more real estate agents hoping to land a deal.
Since the start of the pandemic, the number of new real estate agents has increased by 156,000 to more than 1.5 million, according to the NAR, an increase nearly 60% greater than in the two years before the pandemic.
The combination of low upfront costs of a few thousand dollars and a booming market was attractive to new agents like Carolyn Lee, who told The New York Times that she found herself battling a blizzard in January. with customers to get a quick preview of a new listing. She still had to beat six other bids.
“You have to be prepared to do whatever it takes, especially right now,” she said.
Early figures from real estate data tracking firm Altos Research suggest inventories could be higher ahead of the usual summer selling season, but that same data indicates median listing prices are poised to top $400,000. for the very first time.
Data from Altos also shows that homes are seeing fewer price cuts than ever and one in three goes under contract in less than a week.
This decrease in inventory is also fueling a self-reinforcing cycle, as existing owners are reluctant to sell when they have nothing to buy.
Even so, it’s not a situation that can be solved by simply building more housing, Mohtashami argues, pointing to the building boom that began in the mid-1990s and continued to drive up prices. The whole financial architecture of the United States favors the maintenance of house prices, he says.
Somewhat counterintuitively, inventories will only start to improve if demand starts to slow down a bit, likely due to higher borrowing costs from the Federal Reserve raising interest rates.
“We need the total inventory level back to 1.52 million or 1.93 million just to get back to a normal market,” Mohtashami said. “Until that happens, this is an extremely unhealthy real estate market.”