If you’re looking to buy a house soon, be prepared to face some competition.
That’s because housing inventory for sale is dropping dramatically across the nation, just as we’re heading into what is generally considered to be the most active season for homebuyers and sellers—spring.
A new report from Realtor.com shows that homes for sale nationwide dropped by a whopping 12 percent in December compared to a year ago. This comes a month after a 9.5 percent drop nationally in November compared to the previous year.
The drop in December is the largest year-over-year decline in almost three years, leaving housing inventory at a two-year low. On top of that, new listings dropped by 11.2 percent year-over-year, suggesting relief is not on the way.
“The significant inventory drop we saw in December is a harbinger of the continuing imbalance expected to plague this year’s markets, as the number of homes for sale are poised to reach historically low levels,” says George Ratiu, an economist with Realtor.com.
What does this mean if you’re looking to buy or sell a house? Fewer homes for sale means that buyers have fewer options and thus will likely be bidding on the same houses. If a bidding war ensues, it will drive up the price. Houses won’t stay on the market for as long as they usually do, as the many buyers flock to bid on the relatively few houses for sale.
On the flip side, this puts sellers in a great position, as you’ll likely get multiple offers on your house, which will increase what you get for it. You also won’t have to wait as long to sell your house.
Of course, national trends don’t necessarily reflect conditions in your city. A housing shortage in Atlanta does not affect the housing market in Philadelphia, so it’s important to know inventory levels for your city to set realistic expectations.
In major metro markets, the number of homes for sale dropped by 11.4 percent in December, year over year. The biggest inventory drops came in the Bay Area specifically and on the West Coast generally.
San Jose, San Francisco, Sacramento, and San Diego saw drops of 33.1 percent, 30.4 percent, 29.5 percent, and 28.3 percent, respectively. In California, the inventory drop is notable because it reverses a trend from 2018 where inventory was spiking dramatically.
“Price growth has stabilized in many of the overheated Western markets and lower mortgage rates mean overall affordability and access to inventory has improved. That has many buyers returning to the market and grabbing adequately priced inventory,” says Javier Vivas, Realtor.com’s director of economic research.
Seattle (31.8 percent), Philadelphia (26.3 percent), and Washington, D.C., (24.3 percent) also suffered huge drops in inventory.
The report comes among dire forecasts of worsening housing affordability, caused by a nationwide housing shortage. Predictably, the cities that saw inventory drops also saw a spike in the median asking listing price and a drop in how long houses stay on the market.
But it’s also important to not take market forecasts as a given. Heading into the summer of 2018, similar inventory conditions existed, and one realtor told Curbed that homebuyers faced “the most competitive housing market in recorded history.” But the expected bidding wars never materialized.
Curious how things are playing out in your city? Here’s the data on inventory and asking prices.