The Sellers Strike and Housing Inventory

Will new listings stay down? What will be the impact on inventory?

Note: This post title is courtesy of Conor Sen.

Starting in July, new listings declined year-over-year according to my local market data, and also Realtor.com and Redfin. Realtor.com economist Jiayi Xu noted today:

New listings–a measure of sellers putting homes up for sale–were again down 12% from one year ago. This week marks a seventh straight week of year over year declines in the number of new listings coming up for sale and a second consecutive week with double digit declines, suggesting that homeowners are less eager to list homes for sale compared to last year, even though today’s median listing price is more than 14% higher.

emphasis added

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Note the rapid increase in the YoY change earlier this year, from down 30% at the beginning of the year, to up 29% YoY at the beginning of July. However, the Realtor.com inventory data has been stuck in the +25% to +30% YoY range for 8 weeks in a row.  This suggests a slowdown in inventory increases - mostly due to a decline in new listings.

And from Redfin: Housing Market Update: Slowdown Starts to Ease as Drop in New Listings Hampers Supply

“Many homeowners have been reluctant to put their houses up for sale during a market slowdown, which is now holding back inventory growth,” said Deputy Chief Economist Taylor Marr. “That means buyers have fewer homes to choose from and may lose some of their newfound bargaining power, which allows sellers to maintain their list prices instead of having to cut them.”

Will new listings stay down?

There are always people that need to sell due to the so-called 3 D’s: Death, divorce, and disease. Also, in certain times, some homeowners will need to sell due to unemployment or excessive debt (neither is much of an issue right now).

And there are homeowners who want to sell for a number of reasons: upsizing (more babies), downsizing, moving for a new job, or moving to a nicer home or location (move-up buyers). It is some of the “want to sell” group that is “on strike”.

It is financially difficult to move when your current mortgage rate is around 3%, and your new mortgage rate will be in the 5 1/2% to 6% range. So, it seems likely that new listings will be down year-over-year for some time (something to watch closely).

What will be the impact on inventory?

The sharp increase in inventory since early this year was mostly due to the decline in demand (not a surge in new listings). However, the recent data from Realtor.com and Altos Research shows inventory growth has slowed significantly since early July - likely due to the decline in new listings.

The National Association of Realtors (NAR) reported last week that sales were down 131K year-over-year in July, Not Seasonally Adjusted (NSA). If new listings had been steady, inventory would have increased by about the same amount. However, the NAR reported inventory was only up 60K in July, so the decline in new listings depressed inventory by about 70K in the NAR report.

Following the housing bubble, we saw a surge in new listings starting in the 2nd half of 2005, as many homeowners needed to sell due to excessive debt. That isn’t happening this time. The bottom line is inventory is still increasing due to less demand, but inventory growth has slowed due to fewer new listings.

This could delay the return to more normal inventory levels (I’ve been comparing to 2019). As always, I’ll be watching inventory closely.