Housing Shortage Could Spark Spring Bidding Wars

January 9, 2020
House for Sale
House for sale By Monkey Business - Adobe Stock

We just rang in the new year, but spring is already on the housing industry’s mind. As we approach the most active buying season with rejuvenated hope, there remains a troubling asterisk: The supply is going way down, just in time for a spike in demand. Realtor.com reported that supply dropped 12 percent in December year-over-year. Though builders are doubling down on construction, their efforts are not expected to fully alleviate the shortage. This will amp up competition between buyers, possibly sparking a revival in bidding wars and raising prices. But only time will tell, as similar conditions existed in 2018, and bidding wars never materialized.   

If you’re looking to buy a house soon, be prepared to face some competition.

That’s because housing inventory for sale is dropping dramatically across the nation, just as we’re heading into what is generally considered to be the most active season for homebuyers and sellers—spring.

A new report from Realtor.com shows that homes for sale nationwide dropped by a whopping 12 percent in December compared to a year ago. This comes a month after a 9.5 percent drop nationally in November compared to the previous year.

The drop in December is the largest year-over-year decline in almost three years, leaving housing inventory at a two-year low. On top of that, new listings dropped by 11.2 percent year-over-year, suggesting relief is not on the way.

“The significant inventory drop we saw in December is a harbinger of the continuing imbalance expected to plague this year’s markets, as the number of homes for sale are poised to reach historically low levels,” says George Ratiu, an economist with Realtor.com.

What does this mean if you’re looking to buy or sell a house? Fewer homes for sale means that buyers have fewer options and thus will likely be bidding on the same houses. If a bidding war ensues, it will drive up the price. Houses won’t stay on the market for as long as they usually do, as the many buyers flock to bid on the relatively few houses for sale.

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