The spring buying season kicked off early this year, with homes on the market for 69 days in March — that’s 22 fewer days than February and eight less than a year ago, Realtor.com reported. The robust demand is being driven by buyers who have been searching for some time as well as newcomers ready to make a move, driving inventory levels to record lows.
Vallejo, CA, and San Francisco maintained their No. 1 and No. 2 positions on the website’s list of the 20 hottest housing markets for March. California accounted for half of the cities on the list, with the majority in or near the San Francisco Bay Area.
Midwestern cities took five spots on the list, including newcomers Fort Wayne, IN, Grand Rapids, MI, and Ann Arbor, MI.
Though California is undoubtedly hot, the state did see a 4.7% dip in existing-home sales and a 2.2% drop in median home prices from January to February, according to the California Association of Realtors. Still, those figures were higher (by 4.9% and 7.6%, respectively) than those reported in February 2016.
The state’s inventory woes are expected to continue, which could dampen sales, with active listings declining for the last 20 months, according to the CAR. An uptick in listings is expected for the spring selling season, which should trigger more sales, but demand in the pipeline suggests inventory conditions won’t improve in the coming months.
The Golden State is not alone. In many metro areas nationwide, constricted inventory is hampering the overall housing recovery. In particular, a tight supply of entry-level options as enough existing homeowners fail to trade up to new properties, along with rising home prices, continues to challenge potential first-time buyers. Some homebuilders are responding by creating new entry-level inventory.
With home prices climbing and inventory extremely tight, the introduction of three Midwestern cities to Realtor.com’s hottest markets list may be indicative of the increasing appeal of smaller, secondary markets that offer a lower cost of living and shorter commutes compared to some of the major market cities on the list.
For more housing news, sign up for our daily residential construction newsletter.