Inventory bucked an annual trend, dropping month over month in February despite typically bottoming out each December before rebounding in time for the spring, according to Zillow data.

Spring Madness is a week-long Inman series analyzing this year’s spring homebuying season. We’re digging into the state of the housing market, the impact of rising mortgage rates, the role of open houses and the rapidly vanishing starter home, among other big issues. It’s total madness, all week long.

Nearly half as many homes were available for sale in February compared to two years earlier, according to a report released Thursday by Zillow that indicates buyer demand remains frothy despite record-high prices.

Inventory bucked an annual trend, meanwhile, dropping month over month despite typically bottoming out each December before rebounding in time for the spring homebuying season, according to the report.

“There were roughly 730,000 homes for sale nationwide in February, compared to 1.4 million in February 2020,” the report states. “Historically, inventory has generally bottomed out in December and then rebounded as sellers listed their homes in preparation for the busy spring shopping season. “

“But this year, supply has continued to dwindle well into the new year and inventory was 11.9 percent lower in February than in January,” the report added.

The takeaway

  • Homes sold in 11 days, down from 25 days in February 2020
  • More homes sold than February 2019 or 2020, but dropped 11 percent compared to 2021
  • Inventory is 48 percent below February 2020, and homes are worth 32.4 percent more

Overall sales dipped compared to a year earlier but remained higher than before the pandemic, largely due to low inventory. Yet home sales are expected to pick up compared to last year as buyers scoop up homes faster and at record prices, according to the Zillow data.

The report largely reinforced trends that have been occurring for much of the past two years, after the initial shock of the pandemic had passed and homes began selling faster and for more money than ever.

The typical home was worth 32.4 percent more in February than two years before, the report found, and the online portal giant also expects price growth to accelerate through the spring.

“By the end of February 2023, the typical U.S. home is expected to be worth almost $400,000,” the report says.

“The pandemic brought with it extreme demand for homes that has pushed prices to rise at previously unimaginable rates,” according to the report. “Extreme demand driven by historically low interest rates and a wave of Millennial and Baby Boomer buyers depleted a housing stock that was never really replenished by new construction after the glut following the Great Recession.”

Yet the company expects more homes to sell this year compared to 2021, a year when more existing homes sold than any of the past 15 years. 

Despite rapidly rising mortgage rates Zillow expects that more than 6.4 million existing homes will sell this year.

But it issued a warning.

“Continued elevated inflation heightens the risk of further monetary policy tightening,” Zillow said, “which would result in higher mortgage interest rates and weigh on housing demand.” 

The rent is also high

The report reaffirmed inflation’s impact on the rental market, and a one-year lease signed last month would cost $3,400 more annually than a lease signed two years ago, or $283 more per month.

Rental vacancy rates are approaching historical lows in part because older millennials are unable to buy homes that meet their needs and in part because the younger Gen Z generation is entering the rental market.

Those factors helped drive rent up 17 percent from a year before, and the typical rent in the U.S. reached $1,883 a month.

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