The number of active listings in the first half of 2023 compared with just a few years ago highlights a pronounced dip in inventory in nearly all areas of the country.

Data from realtor.com shows that the number of active listings in the United States has declined by about half since 2019, despite a slight rise over the past few months. In the first half of 2019, there was an average of 1,144,030 active listings, falling to 585,972 by the first half of 2023.

Census Regions

The nationwide drop in listings has been dramatic, but it is also worth looking more closely at which regions have been most affected by the lack of listings.

The most significant drop in active listings between the first half of 2019 and the first half of 2023 occurred in the South, with a decrease of more than 200,000, or 44.2%. The Northeast followed, with a decrease of just over 100,000 listings, or 59.4%.

Although smaller in number, the drop in the Midwest was 55.3% and in the West was 41.5%.

Metro Areas

The story continues at the metro level. Among the 500 largest metro areas, the number of active listings in 285 metro areas was at least 50% lower over the same period and higher in just 19 metro areas.

While nearly all metro areas experienced a drop in active listings, some communities fared better than others. One way to look at this difference is to categorize the 500 largest metro areas into quartiles based on the number of households in each.

Largest Metros (First and Second Quartile):

Data shows that the decrease in listings for the 125 largest metros (Upper Quartile) was 47.6%. By their size, this group accounts for a majority of the overall decrease in listings.

Smallest Metros (Third and Fourth Quartile)

Smaller metro areas have felt the most impact of a drop in listings. The decrease for the 125 smallest metros (Lower Quartile) was 53.2%, a relative decline more significant than any other group of larger metro areas.

This means agents, teams and brokerages, especially in smaller metro areas, will continue to face fierce competition over fewer deals. Buyers are encountering a market with a limited selection of homes and a greater chance of bidding wars.

Drilling down, the metro areas with the largest drop in active listings are not surprising, as they are among the most populous in the country. However, it is interesting to note that the drop in inventory was more significant than the 50% decline nationally in seven of these metro areas, led by Chicago and Philadelphia.

There are a few potential explanations for this. One possibility is that these metro areas have a higher percentage of homeowners who are reluctant to sell their homes, perhaps because they are locked into low-rate mortgages.  Many would-be home sellers may be worried about finding another  home to buy, especially in areas where new home construction is lacking. Older homeowners tend to move less frequently, so underlying demographics cannot be dismissed as a contributing factor.

Takeaway

Whatever the reason, low inventory significantly impacts the housing market in these metro areas. While there are indications of listings increasing in some metro areas, industry professionals should be vigilant and adapt accordingly. According to the 2023 NAR Member Profile, 32 percent of Realtors indicated that a lack of inventory was the most important factor preventing clients from making a purchase.