Demand for residential property is high as individuals and families located in dense urban areas or states with heavy COVID-19 lockdown protocols consider the South and West as locations for vacation homes. As a result, the existing home supply is in short order; in February, the most recent month for which data is available, the supply of existing homes dropped to about 1 million, down from 1.46 million in February of last year and from a high of over 4 million in July 2007.
But soaring demand isn’t the only thing putting pressure on home supply. Because the path to becoming a real estate agent has a relatively low barrier to entry, more people have turned to careers in this field over the last year as the pandemic upended employment across the economy. The National Association of Realtors reports that its membership increased from 1.37 million in February 2020 to about 1.45 million members in February 2021.
Combine this spike in agents with the high-demand environment and the existing home supply has not been able to keep pace.
Other than for a brief moment in December 2019, when the number of realtors was roughly at parity with the existing home supply, the percentage of NAR membership to existing home supply has exploded over the past five months to over 140%. It will likely continue to expand as would-be buyers seek remaining available property.
Adding to demand for existing residential real estate is investor uncertainty in the securities markets and historically low cap rates, or rate of return, on most other sectors of real estate. Investment groups and pension funds have opted to invest in residential homes or undeveloped rural lands, both perceived as safe harbors during this time. Meanwhile, historically low interest rates have continued to fuel the appetite for real estate investors and individuals alike.
