Inventory issues continue to limit home sales and push up prices

The sale of existing homes in the U.S. decreased about 3 percent between March and April — largely due to an inventory that continues to fall short of demand — while prices kept skyrocketing upward.

The latest data from the National Association of Realtors reveals that about 5.85 million homes were sold in the month at the median price of $341,600. That price tag is up 19 percent from April 2020 and represents a new record high.

Year-over-year home sales are still up 20 percent compared to the same time period in 2020, so the market is certainly rebounding from COVID-related slowdowns. But sales could be even higher if there were more homes to meet buyer demand.

If I sound like a bit of a broken record it’s because this is a topic I’ve touched on frequently, such as in this post from March. The dynamics remain pretty much the same — low inventory plus pent-up buyer demand and below-average interest rates have pushed prices higher and higher. It very much remains a seller’s market.

Until one of these elements changes, there’s no reason to expect the upward price trend to stop. One such change could happen on the inventory front, as Lawrence Yun, NAR's chief economist, notes:

"We'll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes. The falling number of homeowners in mortgage forbearance will also bring about more inventory.”

I wrote last month that the inventory is about 4 million homes short of meeting current demand, so there is a long ways to go to even out the equation. High lumber prices have kept construction numbers modest, though the number of new homes approved to be built but not started recently hit the highest mark since 1999, suggesting builders are eager to get going as soon as material prices come down. It will be worth keeping an eye on homebuilding stats in the summer months to get a better sense of where the supply-and-demand balance is headed.