When Irene Wharton started house hunting in El Paso, Tex., early last year, she had some firm ideas about what she wanted. The 81-year-old retired administrative assistant, who at the time lived about 40 miles away in Las Cruces, N.M., was looking for a home in a gated community. She wanted to be close to the El Paso studio where she studies ballroom dancing and to pay no more than $340,000.
“I didn’t want to be house-rich and cash-poor at my age, and I was trying to be conservative,” she said. “I thought it would be a piece of cake.”
Although Wharton initially found some homes she liked, her offers—just slightly above asking price—were rejected. She started unsuccessfully offering $30,000 over asking. Wharton said she often lost out to all-cash buyers. “This market is unbelievably weird,” she said. “I felt that $30, $40,000 over asking was being aggressive enough. Not hardly.”
Wharton had no idea when she started planning her El Paso move that she was tackling one of the country’s most competitive housing markets. Last fall, she rented a home in El Paso and has now convinced her landlady to sell the two-bedroom home for $326,000.
The U.S. is experiencing an unprecedented housing inventory crunch, but no city in the nation has seen the available homes for sale drop more than El Paso. In March of this year, there were just 1,154 homes listed for sale in El Paso County, down 78% from March 2017—the steepest decline of any highly populated U.S. county over that period, according to a MarketWatch analysis. In El Paso, the median home had been on the market for just 38 days as of March, down from about 3.5 months five years earlier. Investor purchases in March more than doubled from five years earlier, while all-cash deals were up 130%, according to data from Attom Data Solutions.
In the app? See the interactive here.
After El Paso, the metro areas in America that have seen the biggest drops in housing listings over the last five years are Raleigh, N.C., down 72%, and Las Vegas, down 71%. Of the 20 cities that have seen the number of homes available for sale plunge the most since 2017, nine are located in Florida, according to a MarketWatch analysis, which focused on larger real estate markets, as defined by counties with at least 5,000 listings in any month of 2017.
From small towns to big cities, suburbs and vacation areas, “for-sale” signs have disappeared across America. At the end of March, there were 950,000 homes up for sale in the U.S., according to the National Association of Realtors, down 9.5% from March 2021, extending an inventory plunge that has gone on for years and been accelerated by factors associated with the pandemic.
A lack of new home building following the housing crash more than a decade ago coupled with a flood of institutional investment capital and demographic forces — like the giant millennial generation entering the housing market in force — have diminished the number of homes available for sale. As a result, housing prices have surged. While rising mortgage rates usually cool demand in the housing market, low levels of available homes may complicate this traditional relationship, analysts say.
In the app? See the interactive here.
MarketWatch analyzed more than five years of monthly housing inventory statistics from Realtor.com, a website that aggregates listing data from the Multiple Listing Service platform used by industry practitioners. The total listing count, both active and pending listings, was parsed at the local level and used to create a new MarketWatch tool. The tool allows you to search the nation’s 2,296 counties that had at least 50 listings in any month of 2017, and see the change in homes available for sale today. You can see the latest available month’s inventory plus the previous five data points for the same month over the past five years. You can also see monthly data for your selected county since 2019, and median list price since July 2016. Because of fluctuations in the housing market from month-to-month, we’ve added a trend line for these data points to show the general trend.
Home to the U.S. Army’s Fort Bliss, El Paso has lots of steady military and civilian government employment, and in the 2000s, it didn’t see the home-price bonanza and ultimate bust that devastated much of the country. The fact that this relatively stable region is now seeing an acute housing shortage underscores the near-universal inventory situation in the U.S., especially in the nation’s Sun Belt.
Adam Perdue, research economist at Texas A&M University’s Texas Real Estate Research Center, said that home builders in El Paso, as in much of the country, are “having a hard time getting housing units completed,” due to supply constraints. The El Paso metro area’s inventory of newly built homes has fallen to its lowest level since 2011, according to data from real estate company Redfin
Research from Realtor.com estimates that the U.S. is currently short some 5.8 million single-family homes, whereas before the pandemic the gap was 3.8 million. Even if builders nationally were to double their pace of construction, Realtor.com estimates it would take five to six years for that gap to close.
“We have this huge shortage and it’s not going to go away anytime soon,” said Ken Johnson, an associate dean and finance professor at Florida Atlantic University.
Raleigh, NC: ‘You look at houses all day. You’ve got to move fast’
For nearly a decade, Samantha Soss and her husband rented a home in Cary, N.C., a fast-growing suburb of Raleigh. When interest rates started to tick up, Soss, a 37-year-old executive assistant and facilities manager, decided she’d better make a move in the local housing market and buy something.
As a first-time homebuyer Soss expected a struggle, but she was unprepared for how brutally competitive the housing market had become in Wake County, N.C., the North Carolina region that includes the state capital of Raleigh and its suburbs. After losing out on two homes, Soss and her husband made a third offer on a house that was $75,000 over the asking price, committing to pay cash if it would seal the deal. Soss was heartbroken and discouraged when the house went to a different buyer.
Uneasy and feeling rushed, Soss and her husband purchased a home in May by offering $25,000 over asking in nearby Holly Springs. The move will increase her commuting time, but Soss said she is happy with the compromise.
“It consumes you. You look at houses all day every day. You’ve got to move fast,” said Soss. “Until you’re actually in it, you don’t even realize just how fast-paced and frustrating it can be.”
Five years ago, in March 2017, there were 5,020 homes listed for sale in Wake County, but in March 2022 there were only 1,407 homes available to buy there, a drop of 72%. It’s the second-biggest housing inventory plunge any highly populated U.S. county has experienced over the period.
There’s not one main driver behind the surge in demand among home buyers in Wake County and across the nation. Instead, there has been a “convergence of demographic trends,” said Daren Blomquist, vice president of market economics at Auction.com, an online marketplace for distressed real estate.
Even before the pandemic, millennials had begun maturing into their prime home-buying years, and were hitting major milestones such as getting married or having kids that often precipitated a desire to buy a home. The largest cohort of the population is now “wanting to become homeowners,” Blomquist said. “So that’s really accelerating the trend in the lack of inventory.”
Meanwhile, over the past two years, the pandemic has prompted a huge swathe of the country’s population to rethink where they want to call home as many workers suddenly discovered they no longer needed to go into an office. Because many people were suddenly free to reconsider where they live, wealth that was once concentrated in markets like San Francisco, Los Angeles and New York is now “being democratized much more widely across the country,” said George Ratiu, manager of economic research at Realtor.com, which, like MarketWatch, is owned by News Corp
At the same time, baby boomers are entering retirement in earnest and flocking to the same types of locations as millennials. “They are looking for markets with a good quality of life, low cost of living, and that includes, of course, affordable housing,” Ratiu said. “And not surprisingly the Sun Belt checks pretty much all of the boxes in that regard.”
The pandemic period of rock-bottom mortgage rates supercharged the buying frenzy, according to Texas A&M’s Perdue. “A lot of people were able to purchase houses that they might not have been able to two or three years ago,” he said.
Rising rents and the popularity of vacation platforms like Airbnb
have prompted a wave of investors scooping up homes to convert into short- and long-term rental units in many parts of the country. In many cases, investors are purchasing these homes from so-called iBuyers — companies like Opendoor
that specialize in buying and selling homes. Around 10% of iBuyers’ sales go to investors that plan to rent the homes, rather than owner-occupants, Blomquist said.
“We’ve seen a big increase in cash buyers rushing into the market,” Blomquist said.
Meanwhile, the increase in housing demand has not been met with an adequate supply of new homes. Home builders took a massive hit following the housing crash that occurred around the Great Recession. “They did not want to get in a situation where they were over-building and that has left them behind the eight ball in terms of providing supply,” Blomquist said.
Consequently, the pace of home building fell well short of the rate of household formation growth, analysts say. In recent years, home builders have started to construct homes at a much faster clip in response to the hot real-estate market, but the pace of building has generally remained under the 40-year average, said Johnson, the Florida Atlantic University professor.
In El Paso, investors looking for properties to turn into rentals are absorbing some of the inventory, said Patrick Tuttle, a broker with Coldwell Banker Heritage Real Estate. Real estate investment data analysis firm Mashvisor in late 2020 named El Paso among six top U.S. cities for Airbnb investing, noting its safe neighborhoods, family entertainment, and high occupancy rates. El Paso Realtor Fernie Sanchez owns 17 Airbnb rentals in the area, and he said he plans to keep adding to his portfolio this year even as he’s forced to bid more aggressively to win properties.
“The train is going to keep going,” Sanchez said, “whether prices are high or low.”
The successful buyers in El Paso today are often paying all cash or using conventional home loans, offering well over asking price and waiving inspection and appraisal contingencies, local real estate professionals say. That can be an issue for the area’s large active military and veteran population. These buyers often rely on loans backed by the federal Department of Veterans Affairs, which don’t require a down payment but do require an appraisal and have certain minimum property standards to ensure the home’s safety. Today, “sellers don’t want to accept VA contracts” because they’re concerned about the appraisal and other requirements complicating the closing, said Cheryl Montenegro, a mortgage loan officer in El Paso. Many of her veteran clients have had to switch to conventional financing and make down payments, even though “they’ve earned the right to buy a home without putting money down,” she said. “Our veterans are being left out in the cold.”
Las Vegas: ‘We’re not close to the number of homes we need’
For Nicole Barber, a marketing director who grew up in Las Vegas, newly flexible pandemic work arrangements provided the impetus to go house hunting in her hometown. She’d been living in Long Beach, Calif., but “as soon as I found out we weren’t going back into the office ever, I started looking for a house” in Vegas, said Barber, 38. “It’s impossible to find and afford a home anywhere in southern California,” she said.
Many Californians are thinking the same thing. “Two out of five people who migrated to Las Vegas in the past year originated from California”—the bulk of them from southern California, said Brian Gordon, principal at Applied Analysis, a Las Vegas-based economic and real estate research firm. They’re “bringing a significant amount of wealth with them, and in many instances that has allowed them to enter the Las Vegas housing market, which is more affordable,” he said.
But given the influx of new homebuyers and limited inventory, the market isn’t as welcoming as many had hoped. Last year, Barber said, she had upwards of two dozen offers rejected. When making an offer on one home owned by an older woman who had lived in the house for decades, she made a video, complete with pictures of her dog and a nephew who lived nearby, attempting to market herself to the seller. “It was such a good video,” she said—but her offer was rejected the same day. Eventually, she stopped going to see the homes, she said, because “it was a complete waste of time.” When she saw a listing she liked, she’d immediately make an offer well over asking price, she said, sight unseen.
Barber considered giving up. But finally, last fall, she found a duplex within Las Vegas’ Clark County, in nearby Henderson, Nev., listed for $300,000. It needed a lot of work, including a new roof, and Barber managed to buy it for about $310,000. She has spent $40,000 to $50,000 fixing up the property, she said, but recent sales of similar homes in the area suggest the home’s value has increased.
As an epicenter of the housing crisis more than a decade ago, Las Vegas is no stranger to residential real estate rollercoasters. Yet many local real estate professionals see no end in sight to the area’s inventory shortage. In March of this year, less than 3,800 homes were listed for sale in Clark County, down 71% from five years earlier. Since the start of last year, the area has generally had less than one month’s worth of inventory of single-family homes, according to the Las Vegas Realtors association.
Homebuilding in the area plummeted in the late 2000s and hasn’t bounced back anywhere near the levels reached before the housing bust, said Bob Hamrick, chairman and CEO of Coldwell Banker Premier Realty in Las Vegas. Although permits have been climbing, “everyone is backlogged,” due to workforce shortages and supply chain problems, says Brandon Roberts, president of the Las Vegas Realtors association. “We’re not even close to the number of homes we need.”
First-time homebuyers face a particular challenge, Realtors say, as institutional investors and wealthier individuals swoop in with all-cash offers. In March, Clark County home sales to investors were up 52% from five years earlier, while cash deals were up 46%, according to data from Attom Data Solutions. Cash offers may only become more common as rates rise, Roberts said, because when rates were in the 2% and 3% range, “it almost didn’t make sense to use your cash.” Investors are also paying top dollar, Hamrick said, as they compete against other all-cash buyers and recognize the potential returns on rental properties. The typical Las Vegas rent is $1,805, Zillow said in mid March. That’s a 33% increase from February 2020, compared with a 17.6% increase nationwide.
Home prices are surging in the face of climbing mortgage rates. Existing single-family homes in southern Nevada sold for a median $460,000 in March, according to Las Vegas Realtors, breaking a record set the previous month. For first-time homebuyers who need several months to find a property in a market with such limited inventory, “you could be completely priced out of what you could afford three months ago,” said Corey Gehlken, a mortgage loan officer at Nova Home Loans in Las Vegas. Gehlken said that in recent months he’s also getting more calls and questions from listing agents asking about any income-verification red flags or other issues that could undermine a deal. “It’s got to be a really, really clean, conventional loan for them to really consider it,” he said.
With competition fierce for the limited number of homes, some buyers are making multiple offers simultaneously—and in some cases causing chaos for sellers. When Thom Riegel, 62, first put his Las Vegas duplex on the market in July of last year, he quickly found a buyer and started to move on the purchase of a larger home in the area that he loved. But it turned out the buyer of his home had also made an offer on another home, and ultimately the sale fell apart, said Riegel, a retail store owner.
Eager to finalize the deal on the new home he wanted, Riegel slashed the duplex’s price by $40,000 when he put it back on the market. This time, it took a few weeks to sell—and in the meantime, the home Riegel wanted was sold to another buyer. He had to start his hunt from scratch and under pressure. Now, there were even fewer homes available that he found appealing, and “the competition suddenly got super fierce,” he said. “I really started feeling the pressure.” He made at least 15 offers over the next few weeks, he said, all of them well above asking price, and got rejected in favor of a cash offer almost every time—even when he was the highest bidder.
When Riegel had to leave town for work, his agent kept shopping for him, dialing him in for FaceTime walkthroughs. Ultimately, he paid $530,000 for a three-bedroom with a swimming pool on a golf course—a home he never saw in person until settlement, he said. Ideally, he would have liked a larger home, but “we just ran out of time,” he said. “Things had to happen, or we were going to be homeless.”
Florida: ‘It looks like we’re in a different state because of all the license plates’
Jelina Gonzalez often works the car pick-up line at the elementary school she teaches at in Palm Beach County, Fla., making sure her students get into their parents’ cars safely.
“It looks like we’re in a different state because of all the license plates,” Gonzalez, 32, said. “We have Arizona. We have Texas. We have North Dakota — random places.”
New kids are enrolling in her school consistently, even with less than a month left in the school year, she added. The situation is a reminder of her family’s struggle to buy a new house.
When Gonzalez and her husband Eric bought their current home in Royal Palm Beach it was more than big enough for them and their dog. But now with two kids running around, a live-in nanny and Eric working from home, the house has become cramped and the family has unsuccessfully been looking to buy a bigger one. “There have been no new homes on the market” lately, Gonzalez said.
Palm Beach County has seen the number of homes available for sale tumble by 59%, from 21,252 in March 2017 to 8,679 in March 2022, MarketWatch found. It’s not just South Florida that’s attracting outsized interest — markets up and down the Sunshine State are among the hottest in the nation. Real-estate agents in Florida say the housing inventory situation is unprecedented.
John Fevrier, who works as an agent with RE/MAX in Sarasota on Florida’s Gulf Coast, said the fervor in today’s market surpasses anything he’s seen in his 27-year career. Fevrier estimated that as many as 70% of the deals he’s involved with feature winning bids paid in cash. Even having cash alone isn’t enough in some cases, though, he said.
Sarasota County’s inventory of available homes has fallen by 61% in five years, from 7,475 to 2,930. Other Florida markets that have seen housing inventory fall by more than 50% in the last five years include Collier County (Naples), Pinellas County (St. Petersburg), Lee County (Fort Myers) and Orange County (Orlando).
The cash craze is fueled by buyers from pricier markets in the Northeast and West. “We’re seeing a lot of buyers flush with cash coming from states like California and Colorado that we never saw before really here,” Fevrier said. “The Pacific Northwest, which once comprised maybe 2% of our sales, is now close to 20%.”
These buyers, Fevrier said, are often drawn to Florida because of the state’s tax policies, which he says are favorable to small-business owners. In particular, the state has no personal income tax and no estate tax.
But not all out of state buyers have an easy go with Florida’s competitive housing market. Chase Davis moved with his wife, Laura, to South Florida from east Tennessee in June 2020, to take a job as the dean of admissions at Palm Beach Atlantic University, a small Christian university located in West Palm Beach.
Davis, who is currently renting and since moved jobs, has toured at least 20 different houses since he began looking in earnest for a place to purchase, and has put in offers on around half of them. None were accepted. “We don’t have enough cash to waive an appraisal and there’s a chance that it’s not going to appraise within $5,000 to $10,000 within what the loan amount will be,” Davis said.
https://www.marketwatch.com/story/inside-americas-housing-inventory-crunch-homes-available-for-sale-plunged-more-than-70-in-el-paso-raleigh-and-las-vegas-in-five-years-11652360287?rss=1&siteid=rss An inventory crunch is making life impossible for home buyers. Our interactive map can help you track the availability of houses for sale near you.