If there’s been one constant them in housing over the last several months, it’s been how the lack of available inventory is impacting the market. Unfortunately, there doesn’t appear to be a light at the end of the inventory tunnel right now.
According to a new report from Black Knight, the number of homes on the market at the end of February was 40% below last year’s level. Black Knight also cautions that inventory looks to be “trending in the wrong direction.”
Case in point: Black Knight’s data shows that new listing volume was down year-over-year in both January and February.
“Any hopes of 2021 bringing an influx of homes to the market and lessening pressure on prices appear to be dashed for now, as new for-sale listings were down 16% and 21% year-over-year in January and February, respectively,” Black Knight Data & Analytics President Ben Graboske said.
“Rather than an influx of homes on the market, we're now 125,000 fewer new listings in the hole compared to the first two months of 2020 and trending in the wrong direction,” Graboske added.
According to Graboske, the scarcity of available homes will only continue to drive prices higher for those homes that do come onto the market, impacting affordability for buyers who are seeing interest rates slowly increase.
"Of course, upward pressure on home prices has also served to tighten affordability, and with rates on the rise, affordability concerns are coming into sharper relief,” Graboske said.
“It now takes 20% of the median income to make the monthly payment on the purchase of an average-priced home, back up to the five-year average after several years of low interest rates mitigating the impact of rising prices on affordability,” Graboske continued.
In fact, according to Graboske, housing is “now the least affordable it's been – factoring in interest rates, home prices and income – since mid-2019.”
That’s not to say that there aren’t homes on the market, as according to Black Knight’s data, there were nearly 600,000 homes for sale at the end of February.
Black Knight also notes that new listing inventory “typically reaches its seasonal peak in May,” so there is still time for things to turn around.