Some Parts Of US Enduring Housing Shortage But Residents Flee High-Priced Coastal Cities

The housing shortage is worsening in many parts of the U.S., but some coastal cities are witnessing an exodus of homeowners, according to a report from residential real estate firm Redfin.

The overall number of available homes for sale dropped for the 12th consecutive month in July, falling nearly 20% to 1.9 million homes – the lowest mark for any July on record, Redfin said.

The lack of homes is particularly acute in some affordable areas.

For example, in San Antonio, Texas, the number of homes for sale sank by 21% year-over-year in July – the largest such decline among the 50 largest U.S. metropolitan areas.

Frederick, Maryland; Newark, New Jersey; Baltimore; and Chicago also witnessed drops of at least 20% over that period.

Redfin explained that the number of homes for sale across the country has fallen because record-low mortgage rates “have sparked a deluge of homebuyer demand that hasn't been matched by an equal increase in the number of people putting their houses on the market.”

Concurrently, the COVID-19 pandemic has accelerated the trend of people moving from expensive, coastal cities to more affordable, inland regions, exacerbating the supply deficit in these areas.

These factors have intensified an already acute housing shortage triggered by a homebuilding slowdown after the 2008 financial crisis, Redfin added.

"There's a perfect storm in the housing market right now," said Jason Allen, Redfin's market manager in Baltimore. "People are more comfortable staying in their homes; they're investing in pools, offices and better backyards instead of moving. But at the same time, there are suddenly a lot more people who want those amenities, so we're seeing this huge wave of buyers. We're meeting far more clients who want to buy a home than sell a home."

As a result, home prices have jumped nationally to an all-time high of about $323,000 in July.

"Buyers are willing to pay more for a house than I've ever seen – I'm talking $30,000 to $50,000 over the listing price, compared with maybe $5,000 or $10,000 over before the pandemic," Baltimore Redfin agent Dan Borowy said. "They're desperate because homes are flying off the market so quickly. I'm selling all of the homes I'm listing within three days."

Allen added: "Baltimore is one of the few major cities in the country where you can still find a home for around $250,000, but those homes are going to disappear in the near future if this level of competition continues.”

However, in contrast, the high-priced San Francisco metropolitan area saw the number of homes for sale surge by 51% year-over-year in July – the biggest such gain of any other major metropolitan area. In New York, the number of homes for sale rose by 13%, followed by San Jose, California, up by 7%.

Redfin agent Carlos Barrientos noted that as technology firms are allowing employees to work remotely, many are uprooting from the pricey Bay Area.

"With offices and entertainment shut down, there's no incentive to stay in San Francisco," he said. "We have a very high concentration of tech jobs, which means we also have a very high concentration of people who can leave the city for parts of the state with bigger backyards. ... All they have to do is set up their Zoom room and get to work."

Many of the people seeking to depart San Francisco are considering relocating to Sacramento or Seattle.

But the exodus from San Francisco is putting pressure on prospective sellers.

"I had one client who spent $50,000 renovating their home in Mission Dolores [San Francisco] – a very desirable, walkable neighborhood,” Redfin agent Gabrielle Bunker said. “They put in new floors, fancy kitchen appliances and a high-power electric-car charger. They got zero offers, and now they're thinking about moving back in. Buyers here have so many choices right now."

New York City has also witnessed the departure of residents for quieter, roomier suburbs, during the pandemic.

For example, six people recently offered to purchase a $499,000 house in Valley Stream, Long Island, without even seeing it in person, the New York Times reported. A three-acre $985,000 property in Hudson Valley, north of the city, attracted four all-cash bids within one day of listing.

Miller Samuel Real Estate Appraisers & Consultants reported that in July the suburban counties surrounding New York City saw a 44% increase in home sales over the prior year. Westchester County alone witnessed a 112% surge and Fairfield County, Conn., saw sales climb by 73%.

Concurrently, the number of homes sold in Manhattan plunged by 56%.

“The people from New York are coming with a sense of urgency, and the thing they want is space,” New Jersey real estate agent James Hughes told the Times. “The demand is insane.”

As for the parts of the country facing a lack of enough homes, Redfin pointed out that more homebuilding can help to alleviate the shortage. Residential construction projects jumped by 23.4% year-over-year in July, while building permits climbed by 9.4% to a seasonally adjusted annual rate of 1.5 million.

"Builders got burned big time during the housing bubble, but they're finally starting to climb out of the hole as homebuyer demand rebounds, which is a good sign for U.S. housing supply," Redfin lead economist Taylor Marr said. "What remains to be seen is whether lumber producers, which are facing slowdowns due to the pandemic, will be able to keep up."