Buyers Want To Know: Why Is Housing Supply Still So Low?
One key question that’s top of mind for homebuyers this year is: why is it so hard to find a house to buy? The truth is, we’re in the ultimate sellers’ market, so real estate is ultra-competitive for buyers right now. The number of buyers searching for a home greatly outweighs how many homes are available for sale.
While low inventory in the housing market isn’t new, it’s a challenge
that continues to grow over time. Here’s a look at two reasons why
today’s housing supply is low and what that means for you.
1. New Home Construction Fell Behind for Several Years
The graph below shows new home construction
for single-family homes over the past five decades, including the
long-term average for housing units completed. Builders exceeded that
average during the housing bubble (shown in red on the graph).
The result was an oversupply of homes on the market, so home values
declined. That was one of the factors that led to the housing crash back
Since then, the level of new home construction has fallen off. For
the last 13 straight years, builders haven’t been able to construct
enough homes to meet the historical average (as illustrated in green on the graph). That underbuilding left us with a multi-year inventory deficit going into the pandemic.
2. The Pandemic’s Impact on the Housing Market
Then, when the pandemic hit, it fueled a renewed appreciation
and focus on the meaning of home. Having a safe space to live, work,
school, and exercise became even more important for Americans throughout
the country. So, as mortgage rates dropped to at or below 3%, buyers
eagerly entered the market looking to capitalize on those low rates to
secure a home that would fulfill their changing needs. At the same time,
sellers hesitated to put their houses on the market as concerns about
the pandemic mounted.
The result? The number of homes available for sale dropped even further. A recent article from realtor.comexplains:
“Last month, the number of home listings dropped 26.8% compared with the same time a year earlier.This
meant there were about 177,000 fewer homes listed in what’s already
typically a slower month due to the holidays and colder weather. . . .”
What Does All of This Mean for You?
For a buyer, low inventory can be a challenge. You want to find the
home of your dreams, and you don’t want to settle. But what if there
just aren’t that many homes to choose from?
There is some good news. Experts are projecting more homes will soon
become available thanks to sellers re-entering the market. Danielle
Hale, Chief Economist at realtor.com, shares this hope, but offers perspective:
“We expect that we’ll start to see a turnaround and inventory will stabilize and start to go up a little bit in 2022. . . . But that means we’re looking at inventory levels of roughly half of what we saw before the pandemic. For buyers, the market is likely to continue to move fast. If you see a home you like, you want to jump on it right away.”
Basically, inventory is still low, even though more homes are coming.
But you shouldn’t put your plans on hold because you’re waiting for
those additional houses to hit the market. Instead, stick with your
search and persevere through today’s low inventory. You can find your
next home if you’re patient and focused.
Remember your goals
and why finding a home is so important. Those things should be the
driving force behind your search. Share them with your agent and be
clear about your priorities. Your trusted advisor is your greatest
support as you navigate today’s low housing supply to find the home of
If you’re planning to buy this year, the key to success will be
patience given today’s low inventory. Let’s connect to discuss what’s
happening in our area, what homes are available, and why it’s still
worthwhile to prioritize your home search today.