Two Years In: Housing Market Transformed by Prices, Lack of Inventory

Two years into the pandemic, the U.S. housing market is virtually unrecognizable from its previous state, with nearly half the number of homes for sale, prices higher by one-third and rising, and rents hundreds of dollars more a month, Zillow^®‘s latest monthly market report¹ shows. 

None of that has curtailed demand, with listed properties flying off the market and sales stronger than before the pandemic.

“We’ve seen strong demand for homes and prices rising at previously unfathomable rates. A wave of millennial and baby boomer buyers have depleted housing inventory that was never really replenished following the Great Recession,” said Zillow economist Nicole Bachaud.

Lack of inventory is driving these historic price hikes. There are roughly 730,000 houses currently for sale in the U.S., compared to 1.4 million in February 2020.

Historically, inventory has generally bottomed out in December and then rebounded as sellers listed their houses in preparation for prime spring shopping season. This year, supply continues to dwindle into the new year. Total inventory in February is 11.9% lower than in January.

Of the 50 largest U.S. metros, those with the largest inventory deficit since 2020 are Raleigh (-69.7%), Hartford (-63%), Providence (-61.8%) and Miami (-61%). Those seeing the smallest decrease are San Francisco (-7.8%), San Jose (-17.9%) and Austin (-26.9%).

The typical U.S. home value is now $331,533, up 32.4%, or $81,000, compared to February 2020, and is 20.3% higher than last year — another in a long line of new records for annual appreciation. February 2020 presented a much more standard 3.7% annual growth.

The rate at which prices are rising is accelerating as well, with month over month appreciation up to 1.6%, up from a low of 1.2% in November.

“Builders are working feverishly to get new construction and move-in ready homes on the market, but it’s going to take time for inventory to rise enough to curb runaway price growth,” Bachaud said. “Homeowners may be worried about rising interest rates, since they make a new mortgage considerably more expensive. But many of them are sitting on a large sum of equity that could sway them to get off the fence, bringing new inventory to the market this spring.”

Looking ahead, Zillow economists expect annual home value growth to continue to accelerate through the spring, peaking at 22% in May before gradually slowing to 17.8% by February 2023. Sales in 2022 are forecast to rise 4.8% above those in 2021, which was the best year for sales since 2006.

Extremely strong demand finds that the houses that do get listed are scooped up in just 11 days, six days faster than in February 2021 and a full 25 days faster than in 2020.

Despite the challenging shopping environment, sales are still brisk for this time of year. More homes transacted last month than in either February 2019 or February 2020, though sales are 11% lower than in 2021. Sales generally slow through March before taking off in April, and the data shows that now.

Rent prices reversed from a cooling trend in January, shooting up 1.1% from last month and 17% from last year. Typical rent across the U.S. is now $1,883 per month, $283 per month higher than in February 2020. Rent growth was slow in 2020 after the outbreak of the pandemic, but it skyrocketed in 2021.

The largest monthly rent hikes among major metros were in Buffalo (2.3%), New Orleans (2.2%) and Miami (1.9%). Only Las Vegas and Birmingham saw monthly declines, at 0.3% and 0.2%, respectively.

¹ The Zillow Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research. The data in the Zillow Real Estate Market Report are aggregated from public sources by a number of data providers for 931 metropolitan and micropolitan areas, dating back to 2000. All current monthly data at the national, state, metro, city, ZIP code and neighborhood levels can be accessed at www.zillow.com/research/data.