Anyone eager to buy a home this spring probably has reasons to feel good. The job market is solid. Average pay is rising. And mortgage rates, even after edging up of late, are still near historic lows.
And then there's the bad news: Just try to find a house.
The national supply of homes for sale hasn't been this thin in nearly 20 years. And over the past year, the steepest drop in supply has occurred among homes that are typically most affordable for first-time buyers and in markets where prices have risen sharply.
In markets like San Diego, Boston and Seattle, competition for a dwindling supply has escalated along with pressure to offer more money and accept less favorable terms.
"Sellers will have the edge again this year," said Ralph McLaughlin, chief economist for Trulia, a real estate data provider. "Homebuyers are really going to be scraping the bottom of the barrel as far as housing choice is concerned."
The intensity of the competition this spring has surprised even sellers like Kathleen Mulcahy, a 37-year-old product manager in Seattle.
Within a week of listing her one-bedroom, one-bath condo, Mulcahy received 21 offers - all above her asking price of $398,000. Most of the offers came with built-in triggers to automatically rise in case a rival bidder sweetened a bid. In the end, she accepted an offer of $500,000 - all cash.
"A lot more than I expected," Mulcahy said.
Yet the changed landscape cuts both ways: Facing higher prices and competition herself, Mulcahy has decided for now to put off buying another home.
"There's very little available, and it's just too expensive right now, so I'm going to wait," she said. "I'll probably rent for two or three years."
About 1.75 million homes were for sale nationally at the end of February, according to the National Association of Realtors. That's down 6.4 percent from a year earlier and only slightly up from January, when listings reached their lowest point since the association began tracking them in 1999. All told, the supply of homes for sale has fallen on an annual basis for the past 21 months.
Among the factors that have fueled the decline in homes for sale:
- Since 2008, the average time homeowners have stayed in their houses before selling has doubled to nearly eight years, according to Attom Data Solutions.
- Many homeowners aren't selling for fear they wouldn't find a new home they would like and could afford. Some who had locked in ultra-low fixed mortgage rates may be reluctant to take on a new loan at a higher rate. Others may wish to sell but can't because they own one of the 3.2 million homes worth less than what's owed on their mortgage.
- Some homeowners own other properties they rent out and have little incentive to give up the steady rental income, especially while they're also benefiting from rising home values.