One key question thatโs top of mind for homebuyers this year is: why is it so hard to find a house to buy? The truth is, weโre in the ultimate sellersโ 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 isnโt new, itโs a challenge that continues to grow over time. Hereโs a look at two reasons why todayโs 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 in 2008.
Since then, the level of new home construction has fallen off. For the last 13 straight years, builders havenโt 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 Pandemicโs 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.com explains:
โLast 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 whatโs already typically a slower month due to the holidays and colder weather. . . .โ
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 donโt want to settle. But what if there just arenโt 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:
โWe expect that weโll start to see a turnaround and inventory will stabilize and start to go up a little bit in 2022. . . . But that means weโre 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.โ
Basically, inventory is still low, even though more homes are coming. But you shouldnโt put your plans on hold because youโre waiting for those additional houses to hit the market.ย Instead, stick with your search and persevere through todayโs low inventory. You can find your next home if youโre 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 todayโs low housing supply to find the home of your dreams.
Bottom Lineย
If youโre planning to buy this year, the key to success will be patience given todayโs low inventory. Letโs connect to discuss whatโs happening in our area, what homes are available, and why itโs still worthwhile to prioritize your home search today.
Content previously posted on Keeping Current Matters
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