Inventory Issues Not Enough to Slow Surging Demand

The demand for housing in the United States has reached a fever pitch, a trend that opposes the norm of this time of the year when the market cools as the winter months set in.

Redfin's Homebuyer Demand Index (the four-week period ending November 14) reported a new all-time high since at least 2017, as the demand for homes is accelerating as the number of homes listed for sale is decreasing at a slightly slower rate than in 2019 and 2020.

"The economy is recovering strongly, and mortgage rates are still near all-time lows. Those two forces combined have caused homebuying demand to hit a record high," said Redfin Chief Economist Daryl Fairweather. "People who tried to buy a home in the spring are coming back for round two, only to find the market is still quite difficult because of a lack of homes for sale. A lot of homebuyers wish they had bought last year, now that it's not just homes that are more expensive, but also gas, groceries and dining out. Many buyers today are limited to move-in ready homes, because it is so difficult and expensive to purchase new appliances or find contractors to make improvements."

Redfin found median home-sale prices rising 13% year-over-year to $357,881, up 30% from the same period in 2019, and up 2.1% from a month earlier. Over the same period in 2019, prices were down 0.1%, and in 2020 home prices rose 0.6%. The study also found that asking prices of newly listed homes were up 13% from the same time a year ago, and up 27% from 2019 to a median price of $354,725.

In a forecast released earlier this week for the year 2022, Fairweather predicts that balance will return to the market next year, but not after a dash to purchase homes with buyers taking advantage of low rates near the 3% range. These run-on sales will further deplete and already-low inventory nationally, but be boosted by new construction as 2022 progresses.

Days spent on the market were on the rise, as Redfin found that homes sold spent a median of 24 days listed, more than a week longer than the all-time low of 16 days seen in late June and July, and down from 31 days a year earlier.

Demand is continuing to spur a rise in price, as 44% of the homes sold during Redfin’s recorded time period sold for above their list price, up from 35% a year earlier.

Nearly half (45%) of the homes that went under contract had an accepted offer within the first two weeks on the market, above the 40% rate of a year earlier. Since the four-week period ending September 19, the share of homes under contract within two weeks was up 1.8 percentage points, and during the same time in 2019, the share fell 2.4 points.

Click here to read more about Redfin’s Homebuyer Demand Index.