More than half of homes selling within two weeks

A new report from Redfin shows how inventory shortages are driving a chain reaction that includes accelerating home prices, unprecedented competition and surprisingly, the suppression of much-needed new listings.

The Seattle-based real estate brokerage looked at key metrics across more than 400 U.S. metropolitan areas during the 4-week period ending February 7.

According to the report, the median home sale price in the U.S. increased 15% year over year to $318,750, while asking prices of newly listed homes hit a new all-time high of $334,770, up 10% from the same time a year ago.

In a typical year, asking prices do not surpass the previous year’s peak until March.

But determined buyers are not letting rising prices stop them. Pending home sales during that 4-week period were up 29% year over year.

For the week ending February 7, the seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other services from Redfin agents—was up 63% from the same period a year ago.

Buyers are also buying more quickly to get ahead of the competition. The report showed that 52% of homes that went under contract had an accepted offer within the first two weeks on the market, well above the 43% rate during the same period a year ago.

This is the first time the four-week average has surpassed 50% since at least 2012 (as far back as Redfin’s data for this measure goes). During the week ending February 7, the rate was 57%.

Homes across the country are also selling for close to listing prices. The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased slightly to 99.3%—1.6 percentage points higher than a year earlier.

Meanwhile, new listings of homes for sale were down 11% from a year earlier.

Active listings (the number of homes listed for sale at any point during the period) fell 37% from 2020 to a new all-time low.

“There is a serious lack of new listings, and although prices are through the roof, homeowners are reluctant to sell, because it’s so hard to buy again unless you are moving to a less expensive area where you can afford to outbid other buyers,” said Redfin chief economist Daryl Fairweather in the report. “Sellers who are concerned about finding their next home are asking buyers for a rent-back agreement, which allows the seller to stay in the home until they can move into their next one. Offering a rent-back agreement can also be a winning strategy for buyers with flexible timelines.”

For more on changing buyer preferences, see how the preferences for large kitchens and remote work-friendly homes are driving new purchases.

Pandemic-era sellers to iBuyers: ‘No thanks’

The booming COVID-19 housing market may have been a windfall for many homeowners and Realtors, but for iBuyers, not so much.

According to a recent analysis conducted by Redfin, in the third quarter of 2020, the nation’s top iBuyers purchased just 0.2% of homes that sold across the 418 U.S. metros tracked in the analysis. That’s down nearly 80% from a year earlier, as homeowners decided there was no need to sell at a discount with both demand and home prices at all-time highs.

“The hotter the market, the less attractive it is for home sellers to let an iBuying company take a cut of the sale,” said Redfin Lead Economist Taylor Marr in the report. “With home prices and demand surging, many sellers figure they can sell their home quickly without having to give away any of their profits.”

The Redfin analysis of MLS and public records data identified home purchases and sales made by well-known national iBuyers, including RedfinNow, Opendoor, Zillow and Offerpad, all of which instituted a temporary shutdown early on in the pandemic in an effort to minimize unsold inventory on their balance sheets. Ironically, it was at a time when consumers could have used the instant cash and certainty of an iBuyer.

While iBuyer purchases did increase from the second quarter, when iBuyers only bought about 800 homes, the decision to shut down during the pandemic has left iBuyers scrambling to attract homeowners who want to sell at a discount during a red-hot market.

“We’re still playing catch up from the spring, when we stopped buying homes for a few months,” said RedfinNow Asset Manager Sabrina Archolecas in the report. “We’re working on building up the inventory of homes that we can sell.”

This is not the first, or the only, way that the pandemic has affected buying preferences. For now, iBuyers like RedfinNow are focused on purchasing homes owned by families who don’t have time to do renovations themselves and need to sell quickly so they can buy their next home, Archolecas said.

Nationally, iBuyer-owned homes sold more quickly than non-iBuyer homes in the third quarter, with a median market time of 13 days, compared to 33 days for non-iBuyer homes.

But a quick sale at a discounted price only addresses the needs of a small segment of the market. Ironically, while iBuyers are well-positioned to serve customers seeking contactless transactions, the pandemic has revealed an inherent weakness in the iBuyer model.