Janine D. Kiah has been searching across Philadelphia for a house with outdoor space for her family of four since early June.
“When I first started looking, you could put a zip code in, and literally no homes were for sale,” said Kiah, a lawyer with two young sons who is choosing home ownership over renewing a pricey Germantown apartment lease.
Now she can find houses, but they’re selling quickly. She fell in love with one in West Philadelphia that went on the market on a Thursday in June. She walked through it on Saturday, but by the time she contacted the listing agent Sunday to make an offer, the seller had accepted one of several others.
During Kiah’s search, one listing agent asked whether she wanted to bother seeing a property that already had 11 offers, and she’s made bids on a few houses that went to other buyers.
“Everything’s a bidding war. Everything,” Kiah said. “The joke was: Make an offer before you make a showing appointment.”
The number of single-family houses listed for sale in Philadelphia fell in June to the lowest amount in the nearly 20 years that a local multiple listing service has been keeping track, according to Drexel University economist Kevin Gillen. Fewer than 3,000 houses were listed in June, a number far below the historical average of roughly 5,000 houses listed in any given month in the city, he said.
Gillen’s analysis quantifies what the real estate industry, regionally and nationally, has known for a while: Levels of housing stock are falling, which presents a challenge for buyers.
“It’s surprising that they just seem to keep on dropping,” Gillen said. “For the past year, every quarter, inventory hits a new low. And it’s like, how low can they go? Like that limbo song.”
In June 2019, roughly 4,800 houses were listed for sale. This June, the number listed was down by more than 1,800 for a total of 2,978 houses listed.
In the first half of 2020, inventory stayed around 3,400 or lower. That’s down from highs more than a decade ago as housing stock swelled in the years before the housing bubble burst. During the last two decades, inventory peaked at 12,362 houses in October 2006.
This year, the usually strong spring housing market has shifted in a more subdued state to the summer after buyers pulled back early in the pandemic and returned as lockdowns ended. Home sales in April, May, and June dropped 43% from the same period last year, according to Gillen. Some sellers have resisted listing their homes during the pandemic and are waiting for good news to resume their plans.
The deferred spring market “is sort of insult on top of injury” in “an already skinny market in terms of inventory,” said Chris Finnegan, chief marketing and communications officer of Bright MLS.
William Festa, president of the Pennsylvania Association of Realtors, said he receives familiar responses when he asks fellow Pennsylvania Realtors about their local markets.
“Almost to the person, the answer is ‘I wish we had more inventory. We need more inventory.’ The market is hot. We have buyers out there, the interest rate is low, but the inventory is also still low,” Festa said. “It’s looking to be a good year, but we need that inventory to make it a more balanced market.”
Jillian Gonzalez, a Realtor at RE/MAX Access in Old City, said she’s warning her buyers how tough the market is for them. Buyers are unlikely to get sellers to help with costs. Sellers are less likely to be willing to make repairs.
“Buyers are still thinking they can get a bargain, a deal, and sometimes that’s not necessarily the case. Sometimes, it takes them losing out on a bidding war a couple of times before it finally hits them,” she said. “I tell my buyers, ‘Listen, if you’re even somewhat considering [a house], you have to make a jump on it right away. Because if you don’t, that one day could be the make-or-break.’”
New Jersey has seen a nearly 50% drop since 2015 in the number of houses on the market, said Angela Sicoli, president of the state’s branch of the National Association of Realtors. “It’s a concern, because there are not enough homes for the amount of buyers that want to purchase,” she said.
Low inventory is helping to drive up home prices, pushing more houses out of reach for potential buyers with lower incomes.
In addition to low housing stock, many Philadelphia houses that are available and in first-time home buyers’ price range aren’t ones they’d want. And low-income buyers who may be interested in those homes are being priced out of the market. Even as many houses are selling quickly, these factors have kept steady the average number of days houses are staying on the market. In June, it was 46 days, Gillen said.
Jibri Bond, broker of record at Peters Gordon Realty based in Germantown, said the city’s insufficient inventory of appealing homes was a problem last year that has intensified in 2020. Buyers want an “HGTV feel” in a home, which includes updated kitchens and bathrooms and open floor plans, he said.
“I’m seeing above-asking price offers, lots of bidding wars,” all because of a lack of inventory, he said. Even houses that need some work get several offers and sell fast.
Some buyers are waiving home inspections, which he does not recommend.
“The market is extremely competitive,” Bond said. “Offers have to be strong. You have to be preapproved [for a mortgage] and ready before you go looking at houses.”
Many buyers, especially first-timers, are looking for properties that are renovated and move-in ready with features such as central air-conditioning and finished basements.
“Those are the definite eye-catchers and the ones that are really going to go quick,” Gonzalez at RE/MAX Access said.
To get exactly what they want, many buyers consider newly built homes. Home builders’ confidence in the national market for new single-family homes rebounded to pre-pandemic levels in July, rallying from a sharp drop in April and a continued slump in May, according to the National Association of Home Builders. June was the first month since March that more builders were optimistic about the market than were pessimistic. Confidence in the new single-family market in the Northeast region of the country dropped the most in April but is now on par with confidence in the other regions.
Festa of the Pennsylvania Association of Realtors said he’s been wondering for the last year and a half when the housing market would show more balance between inventory and buyers, thinking that inventory might increase in a spring market, or maybe a fall market.
“And they’ve come and gone a couple times now,” he said, “and it’s still been low inventory.”