In 2021, many home buyers across the U.S. could struggle to find a suitable home, due to inventory shortages. Local housing markets across the country have experienced a significant decline in the number of homes for sale.
At the top of the list are Boise, Idaho; Stockton, California; Little Rock, Arkansas; and Fresno, California. In these housing markets, the total number of real estate listings dropped by more than 50% over the past year or so.
That’s a significant reduction, and it will make things more competitive for home buyers in 2021. This same trend has affected many cities across the U.S., to varying degrees.
The takeaway: In 2021, many housing markets will favor sellers over buyers, because of limited inventory options. Buyers in those areas will have to be patient, persistent, and open-minded during the house-hunting process.
Top 10 “Shrinking” Housing Markets
If you’ve been following U.S. housing trends lately, you’ve probably encountered phrases like “inventory shortage” and “tight supply.” This has been one of the big stories within the real estate industry, going back months.
New data and reports show that some housing markets across the U.S. have gotten tighter in recent months, with already-low supply levels dropping even further.
This trend has hit some cities more than others. And you’ll find ten of the most heavily affected metro areas in the table below.
On November 19, the research team at Realtor.com published a housing market update that revealed key trends for metro areas across the country. It also showed how the total number of real estate listings has changed over the past year or so, for 100 of the largest metro areas in the U.S.
According to that report, metropolitan-level housing markets in Baltimore, Boise, Fresno, Little Rock and Salt Lake City have experienced a sharp decline in the number of homes for sale.
The table below is an excerpt from a broader list that included 100 of the nation’s largest metro areas. We sorted the data provided by Realtor.com to create a list of the ten cities where housing market inventory (i.e., total real estate listings) has dropped the most.
Note: The “YoY” label stands for “year over year.” This particular report shows changes that occurred between mid-November 2019 and mid-November of 2020.
|Metro Area||Total Listings YoY|
|Little Rock-North Little Rock-Conway, Ark.||-60.90%|
|Colorado Springs, Colo.||-56.40%|
|Riverside-San Bernardino-Ontario, Calif.||-53.90%|
|Salt Lake City, Utah||-52.70%|
Home buyers in Boise, Idaho — in particular — could struggle to find the right house at the right price in 2021. Boise has been a hot housing market for a while now, and it has only gotten tighter over the past 12 months.
How the Coronavirus Has Affected Inventory
The ongoing coronavirus pandemic has something to do with these trends. Some would-be sellers are reluctant to list their homes right now, due to concerns related to the pandemic as well as broader economic anxieties.
To quote the Realtor.com report mentioned earlier:
“In the spring, we saw that the more coronavirus cases a market had, the less likely sellers were to put their homes on the market … If that underlying relationship remains, rising coronavirus cases could be a challenge for the housing market in the weeks ahead.”
The bottom line here is that home buyers in these and other tight real estate markets across the U.S. will have to work harder to find a suitable property.
Among other things, this means:
- Making a strong initial offer based on recent sales data
- Expanding the search box to include “second choice” locations
- Being open-minded and flexible when it comes to desired features
Home Prices Rising Steadily in These Metros
The cities listed above (and many others that have seen inventory declines) have something else in common. Home prices within these housing markets have risen steadily during 2020, despite the coronavirus pandemic and economic downturn.
While the size of those gains varies greatly from one city to the next, the overall trend has been positive.
In the Boise, Idaho real estate market, for example, the median home value has risen by around 15.2% over the past year (according to Zillow). Salt Lake City experienced a gain of around 9.4%. Home values in Colorado Springs have climbed 10.8% over the past year or so. You get the picture.
In these and other housing markets across the U.S., tight supply and steady demand are putting sustained upward pressure on home prices. These trends are also making things tougher on home buyers, leading to bidding wars in some hot real estate markets.
According to a November 2020 report from the national real estate brokerage Redfin:
“Nationwide, 56.3% of Redfin offers on homes faced competition in September , down from a revised rate of 59.1% in August. While that’s the first decline in at least five months, a majority of offers still encountered bidding wars—for the fifth month in a row—indicating that competition remains intense in many parts of the country.”
Granted, their definition of a “bidding war” is fairly broad. That same report explained that a home-buying offer is “considered part of a bidding war if a Redfin agent reported that it received at least one competing bid.”
The Redfin report also singled out Salt Lake City (which appears in the top-ten list above) as one of the nation’s most competitive real estate markets. Utah’s most populous city “had the highest bidding-war rate, with 81.1% of Redfin offers encountering competition.”
Here’s the bottom line to all of this:
In many cities across the United States, housing market inventory has declined sharply over the past year or so. These supply reductions could affect many home buyers in 2021, mainly by increasing competition and limiting options. Supply-and-demand imbalances will also keep house values rising in many real estate markets.