Nationwide housing inventory plunges to historic low

Supply of for-sale homes fell over 30% in the last three months of 2021

(iStock/Illustration by Kevin Rebong for The Real Deal)
(iStock/Illustration by Kevin Rebong for The Real Deal)

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America’s housing inventory has been tightening for two years, but it absolutely cratered in the last three months of 2021.

For-sale inventory plunged 31.6 percent in the fourth quarter, dropping to a historic low of just 753,102 units nationwide in December. After falling nearly 29 percent in 2020, inventory dropped a further 26.6 percent during the course of last year, according to listing giant Zillow.

48.7%, Drop in national home inventory from January 2019 to December 2021

In a historically hot housing market, inventory remained under 1 million for almost half the year. A modest recovery in the spring and summer saw it peak in August at 1,142,587 — nearly 36 percent below where it stood in August 2019 — before dramatically falling again.

Pandemic-related supply-chain issues throttled construction, but record demand was the primary driver of the inventory shortage last year, pushing home prices to all-time highs in several markets.

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A drop in home sales in the later part of the year was largely blamed not on weakening demand, but the shrinking number of homes available.

The inventory crunch has played out differently across the country. Among the top 50 largest metropolitan areas tracked by Zillow, Raleigh, North Carolina, saw the biggest drop over the past two year, with inventory cratering more than 65 percent between the start of 2019 and the end of last year.

Milwaukee, Wisconsin, saw the lowest drop, with only about 9.8 percent fewer homes for sale in December 2021 than in January 2019.

Among the top five metro areas, Los Angeles lost the most inventory, with a 53.3 drop, while New York City and Chicago saw declines of about 42 percent each since the start of 2019.

Some economists say that the U.S. housing market is due to cool in 2022, allowing inventory to recover somewhat, but the supply of for-sale homes would have to nearly double to reach the level recorded in January 2019.