Redfin Forecast: ‘The Mother of All Inventory Crunches’
Despite a strong start to the 2020 housing market, Redfin, Seattle, said a deepening shortage of homes for sale and surging homebuyer demand are set to push prices up at the fastest rate in years.
“Buyers may be coming out of winter hibernation early, but so far sellers are few and far between, which is setting the stage for intense competition,” Redfin said.
“Demand will be strong in 2020—just as strong as, if not stronger than, in 2018 and 2017,” said Redfin chief economist Daryl Fairweather. “The big question for the housing market this year is supply. Will homeowners sit on the sidelines, content with their refinanced loans, or will they want to get in on the action too and move up, move down, or cash out entirely? New construction is beginning to pick up in some markets though, so even without new listings of existing homes, there will be some relief for homebuyers hoping for more selection. However, due to the high cost of acquiring and developing land in expensive coastal cities, much of that new construction will be built far away from urban centers or in already affordable metros.”
The report said it’s typical to see a spike in early homebuying activity, but this year the jump is unusually large. The Mortgage Bankers Association’s Weekly Application Survey data saw strong activity in January, hitting an 11-year high mid-month.
Redfin said unless a lot of new housing inventory hits the market soon, the 10-year peak in homebuying demand, coupled with a 20-year low in the numbers of homes for sale, could lead the housing market straight into “the mother of all inventory crunches.” That could result in a sudden and rapid rise in bidding wars and spiking home prices.
“It is busier than I expected this year,” said Redfin Boston listing agent Delince Louis. “Low interest rates and low inventory are fueling activity, and we are seeing activity now that we normally wouldn’t see until March. 2019 was slow, people were worried about a recession, but this year is back to being competitive. A lot of millennials who put their searches on pause last year are coming back now, and they are coming back early because they want to beat the rush.”
Seattle Redfin agent Shoshana Godwin says 2020 already feels busier than even the craziest times in 2017. “I’m regularly seeing homes with well over a dozen offers that sell for hundreds of thousands above list price, even in the middle of our recent snowy week,” she said. “In a typical year, I’d say to wait it out and expect more homes for sale in the next few months…but now I’m warning clients prices may only continue to rise and the inventory may not appear.”
Redfin said if data continue coming in as strong, 2020 “may turn out to be the most robust housing market in a decade. That’s great news for those looking to sell a home, but for homebuyers it will mean increasing competition and rising prices.”
The report can be accessed at https://www.redfin.com/blog/2020-housing-market-forecast.