Where Has All the Inventory Gone?

What’s keeping housing inventory off the market?

by Mark Pruner

mark@bhhsne.com | Berkshire Hathaway

Inventory is way down in Greenwich. In fact, it’s at all-time, record lows. Our previous record low for inventory was 299 single family homes a couple or years ago on January 1st, just after all the year-end expirations hit. At the end of February, we only had 277 listings and this was actually down from January 1st which is traditionally the low point of the year for inventory. Our inventory traditional grows slowly in January, and the first part of February, and then starts to accelerate by the third week of February as the “spring” market starts (which I guess is better than calling it the late winter market, which is what it really was this year).

As of March 10,2021 we have 281 listings, so we might be starting to see more spring inventory come on faster than it is going off, but as with most things Greenwich real estate it zig-zags week to week. Our transactions, contracts plus sales, started out strong and have continued strong. We are up 94% on transactions through the end of February. This can’t keep on much longer, because we are running out of inventory.

As of the end of February, inventory had dropped 46%, which is 236 fewer listings that last year at this time. We came into the new year with very low inventory, and it got worse. New listings are coming on slower this year than last year. In 2020 through March 10th we had added 236 listings, this year we have only added 191 listings or a drop of 45 listings. We are down 19% in new inventory this year and it’s even worser than that.

Last year we a lot of shadow inventory, whose owners had been waiting for years to put their house on the market and finally did so in 2020.  

Our inventory dropped in 2020, but then it held steady, so new inventory was coming on as fast as sales and contracts could take it off albeit with below average total inventory.  The result was sales were up 63% last year and most of this increase was in the last five months of the year. From August to December sales were often double what they normally are. Then came 2021 and our sales have continued to be almost twice what they were in the pre-Covid months of January and February 2020.

At the same time, inventory has dropped in a zig-zag pattern in 2021 so far. It looks like we still have some shadow inventory left from $5 – 10 million where our 2021 listings are actually up by 20 listings. This has kept up our months of supply for that price range from dropping even more, but the question is for how much longer. If you exclude the $5 – 10 million price range, we are actually down 65 new listings from 2020. Under $1 million we have had only 18 new listings down 54% from last year.

New Inventory listings from 1/1 – 3/10/2020
New listings from 1/1 – 3/10/2021

What’s also remarkable is of the 191 new listings that we have had come on this year, 67 already have contracts and 18 have already closed. Now, of those 18 listings, 12 actually had zero days on market. What that means is that these were private transactions, that are being reported so other agents can see the selling price and so that the listing and selling agents can take public credit for the transaction.

              What’s keeping listings off the market

With the market as hot as it, many listings are not making to a public listing. Agents announce at their office meetings that they have a listing coming on and another agent says, “I think I have someone for that.” The GMLS implemented the NAR required rules last year which prevents agent from marketing these so called pocket listings outside of their firm. If you look at the contract, the listing is with the homeowner and the brokerage firm, so the brokerage is really marketing the listing to itself.

Interestingly, many homeowners who might have listed their house last year during the dip in Covid cases are reluctant to list their houses now, since if they just wait a couple of months, most of the people who come through their house are likely to be vaccinated. What’s a few weeks delay in a rising market.

Another factor is that we have practically no new construction. What we think of as new construction is really replacement construction. I sold three land listings last year, one truly was raw land, but one was to replace a house that had burned down and one was an oversized lot with a house to be torn down plus a subdivided lot. So, four lots sold that will only add two houses to our housing stock.

The other thing we have talked about is the apparent disappearance of our shadow inventory under $4 million last year. From $4 – 5 million we are up 1 more listing in 2021 than in 2020 we do have a gain of  19 more listings this year over $5 million. What I failed to mention earlier is that we entered 2021 with well below average high-end listings. So we are actually down 10 total listings over $5 million even with 19 more new listings this year. The only real increase in inventory over last year is from $6.5 – 10 million where we one more listing.  

If you look at the percentage change chart comparing month end February 2020 to the end of February 2021 one of the other things you’ll notice is a lot of cells with Excel error messages. The error messages mean there were no sales in that category last year. (BTW: I hate whoever at Microsoft came up with  “#DIV/0!” for this error. It’s ugly and a pain to deal with.) If you scan the percent change chart all these error messages are above $6.5 million and below $600,000. The former is due to no sales at the beginning of 2020 at the high end and later is due to no inventory under $600,000 this year.

Another blogger here in town accused me of being a Pollyana, which I look at another way of saying I’m optimistic. The optimist says the snow is gone and is being replaced by snowdrops. Lots of folks have been vaccinated and lots more are every day. Rising price will encourage more people to put their houses on the market and homeowners will push for public sales to get multiple offers rather than the private sales. All this will result in us getting back to 600 listings by the end of March.  (I think that may be a little too optimistic, I’d be happy to get to 400 listings.)

Stay tuned our market continues to be interesting.

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