New real estate listings are down across the country, and cities such as Milwaukee, Philadelphia, and New York are leading the decline, according to Realtor.com. The drop in supply comes as demand for new housing surges after the months-long coronavirus shutdown put the industry on pause during its busiest months of the year.
A big chunk of that demand is coming from a fresh stock of millennial homebuyers who are entering the market despite the pandemic.
"We've heard a lot of stories of millennial buyers saying 'hey maybe this a good time to pull the trigger and buy my first home,'" said Jeff Tucker, an economist for Zillow.com. "They're often surprised when they are far from the only people out there house hunting in the middle of the pandemic."
But buyers have jumped back into the market faster than sellers, who are holding out for reasons ranging from economic uncertainty to safety concerns.
"Buyers and sellers all hit the breaks this spring, especially in March, April, and May,' Tucker said. "A lot of activity came back in June actually, but the key thing there is that buyers have come back to the market faster than sellers."
In Philadelphia, for instance, listings are down 34 percent from the same period last year, according to Zillow. An analysis from Realtor.com similarly found that listings in the metropolitan area between March and May were down 48 percent from last year.
Supply was tightening long before coronavirus, however. Historically low mortgage rates have spurred a home-buying spree that is pushing the market to its limits.
"This was a market already starved for inventory, essentially where supply was really lagging behind demand for homes, and demand was supercharged by these very low interest rates," Tucker said. "All those forces accelerated during the pandemic."
Then the lockdown came in March, and the real estate industry shut down for upwards of two months during its busiest season. When it reopened, some sellers were reluctant to dive back into the sales process, especially one that potentially exposed them to risk.
"One of the problems is that some people have not put their houses on the market, because they don't want people in their houses," said Damon Michels, an associate broker with Berkshire Hathaway HomeServices Fox & Roach who serves both Philadelphia and the surrounding region.
Quarantine has also reunited families under one roof, pushing former empty-nesters who were looking to downsize to reconsider or at least hold out on the big move.
"All of a sudden, when they thought they were empty-nesters, their kids have come home," said Michels.
In March and April, as unemployment spiked and rent payments dwindled, 2.7 million U.S. adults moved back in with a parent or grandparent, according to the U.S. Census data. The majority were from Generation Z, or between 18 to 25 years old. That same group saw a 25 percent drop in employment over the same months.
Their demographic older siblings, meanwhile, were pushing ahead with plans to buy their first home. Some of these millennials are looking outside of the city to buy.
"I have people who are selling in Passyunk and then moving to New Jersey or the PA burbs," said Amanda Johnson, a Realtor in the Philadelphia office of Compass. "If they were on the fence between staying in the city or moving to the suburbs, then they've gone with the suburb side more."
Michels said the higher end of the market was particularly busy in the suburbs, with bidding wars, over-asking, and escalation clauses heating up the sales process.
"This is more on the Main Line and in the suburbs, in a price range that's maybe $300,000 to a million," he said. "The city market is calming down a little."
Some of the delays in listings can be chalked up to simple logistics. Sellers have a lot more work to do than buyers in restarting a housing sale.
"It's just a slower process," Tucker said. "If you decide 'hey I'm going to sell my home,' you'd have to be a superhero at cleaning your house and getting photographs to get it listed within even two weeks."
The federal response to coronavirus is also a factor. The CARES Act gave homeowners the ability to put their mortgage payments into forbearance if they lost a job, and 8 percent of mortgages have currently done so, according to Zillow.
"Normally you would expect in a recession a lot of those people losing their jobs and falling behind on their payments to list their homes or end up foreclosure, and the bank sells their homes, which is even more distressed," Tucker said. "But this time around the most distressed portion of the market is actually frozen in place. That's un-debatably good news for those families, but a major side effect is a lot fewer listings that would come into the market in a recession like this."