Real estate agents are seeing it in all new house listings: Back-to-back weeks with 20 or more across the United States and Canada. That’s the high-water mark for the phenomenon, which comes as sellers have pulled their listings to encourage bidding wars and inventory dwindles.
“The data from all four quarters suggests that the limited inventory is clearly impacting demand for new homes,” said Sarah White, national sales manager for Realtor.com.
Affordability for a home is the biggest hurdle many buyers face, and with prices continuing to rise, affordability is weakening. Prices were rising faster than incomes nationally until the start of the year, when the gap narrowed. The new increases have been far more steep in some markets.
Sellers are pulling listings in a bid to attract buyers, who can push back. Many sellers find that the market is oversupplied and that buyers can set higher offers. More newly built homes on the market also pushes out more older, less-desirable listings. (An option for those looking to sell: Sell your current home and move into a newly built one, which tends to be cheaper than an older, single-family home, but often has fewer features.)
The number of new listings dropped 17 percent in May, the National Association of Realtors reported Thursday. According to that report, seller turnover declined in every region except the Northeast. The Pending Home Sales Index, an indication of pending home sales, also fell sharply in May, with sales contracts flat in the Northeast, down 4 percent in the West and down 2 percent in the South. It’s not clear how much of that is seller pull-downs.
The impact of a tightening supply of homes is felt most prominently on the West Coast, where prices are rising most rapidly. Seattle, San Francisco and San Jose all had 10,000 more new homes listed for sale in May than they did a year ago. Only Sacramento, Calif., and Tampa, Fla., were up 1,000 to 2,000 listings.
Real estate agents have heard from homeowners, and there’s a possibility that builders will scale back in the future as prices continue to rise.
That doesn’t mean prices won’t keep increasing. Many of the new homes would have cost more than $1 million five years ago. And as Wall Street continues to recover, investors are buying more starter homes as an investment. New homes account for a sliver of overall home sales. Sellers may move faster when prices rise more quickly, and buyers still need to put their best foot forward for a home purchase. But the decline in new home listings is likely to continue into next year.
— Sutter Dow & churkin