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Mortgage

Housing inventory is down 40%. Buyers are paying the price

Annual home prices grew 11.6% in January

Prices are up sharply as housing inventory continues to plateau, leaving 40% fewer homes on the market compared to last year, according to a report prepared by Black Knight.

Instead of making up for the shortfall, new listings have slumped further in 2021. Year-over-year, new listing volumes were down 16% in January and 21% in February — amounting to a 125,000 deficit in inventory compared to the same time in 2020.

“Any hopes of 2021 bringing an influx of homes to the market and lessening pressure on prices appear to be dashed for now,” said Ben Graboske, Black Knight’s data and analytics president.

Buyers who were fortunate enough to snag an available single-family home – new listings are down 46% from a year ago – paid a premium. In February, the median single-family sales price rose nearly 16% from last year.

Home prices in most big cities also increased due to low inventory. In nearly three quarters of the 100 largest U.S. markets, annual home prices grew more than 10%. Overall, home prices grew 11.6% year-over-year in January, the most growth in a single year since 2005.


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Boise, Idaho, and Spokane, Washington saw the greatest home-price appreciation, growing 26% and 20% year-over-year, respectively. In Chicago, meanwhile, home prices grew just 7%.

“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,” said Graboske.

Housing affordability is at its lowest point since 2019 as a result of low inventory and high prices. The share of median income needed to make payments on an average-priced home with a 20% down payment is now 20%.

But in some high-priced markets, the affordability pressure is even more acute. In Los Angeles, the share of income required to pay a mortgage swelled to 44%. San Jose and San Francisco were not far behind, with a mortgage payment eating up 40% and 37% of the median income on average. In other cities, like Cleveland and Cincinnati, Ohio, a mortgage payment represents just 14% of the median income.

After eight straight months of declines, the national mortgage delinquency rate rose to 6.0% in February from 5.85% the prior month. The troubling figure may not indicate an increased financial strain on homeowners, however. The increase coincided with a short month that ended on a Sunday, leaving fewer days to make payments.

The daily mortgage payment rate, which is not affected by calendar month irregularities, rose to an eight-month high in February. The number of active forbearance plans dwindled to 2.57 million, the lowest level of paused payments since April 2020.

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