Many Americans are ready and eager to buy a home right now. But they're having trouble finding one.
Home sales edged down 6.6% in February compared with the previous month because there just aren't enough houses out there for people to buy.
That lack of supply is also driving up prices as bidding wars break out with multiple offers on many homes.
"The housing market is out of whack," says Lawrence Yun, chief economist at the National Association of Realtors. "There's a lot of demand, but the supply is not coming along."
Yun says homeowners in America collectively gained $2 trillion in home equity just over the past year alone as home prices rose 16%.
A typical homeowner has gained $25,000 in home equity, Yun says. He says that's great if you own a home, but it exaggerates the wealth gap because it makes homeownership harder to afford for would-be, first-time buyers.
The number of homes for sale is at a record low, with just a two-month supply at the current pace of sales. Once homes do go on the market, they sell fast. Homes are also selling at a record pace — just 20 days after being listed.
"An increase in inventory is the best way to address surging home costs," Yun says. He says several factors are contributing to the lack of supply. He says for years after the housing crash more than a decade ago, homebuilders were building too few homes. Some smaller homebuilders went out of business during the crash.
"We need to build more homes," Yun says. He says during the pandemic a big increase in the price of building materials has made it harder to build smaller, more affordable homes in particular.
Also, he says, some older Americans have been hesitant to list their homes for sale because they were afraid of getting COVID-19 with people coming into their homes as part of the sales process. So those people have been waiting to list them.
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