Why is Housing Inventory So Low?

One question that’s top of mind if you are thinking about a move today is: Why is it so hard to find a house to buy? And while it may be tempting to wait it out until you have more options, that’s probably not the best strategy. Here’s why….

There aren’t enough homes available for sale, but that shortage isn’t just a today problem. It’s been a challenge for years. Let’s take a look at some of the long term and short term factors that have contributed to this limited supply.

Underbuilding is a Long-Standing Problem

One of the big reasons inventory is low is because builders haven’t been building enough homes in recent years. The graph below shows new construction for single-family homes over the past five decades, including the long-term average for housing units completed.

For 14 straight years, builders didn’t construct enough homes to meet the historical average (shown in red). That underbuilding created a significant inventory deficit. And while new home construction is back on track and meeting the historical average right now, the long-term inventory problem isn’t going to be solved over night.

Today’s Mortgage Rates Create a Lock-in Effect

There are also a few factors at play in today’s market adding to the inventory challenge. The first is the mortgage rate lock-in effect. Basically, some homeowners are reluctant to sell because of where mortgage rates are right now. They don’t want to move and take on a rate that’s higher than the one they have on their current home. The chart below helps illustrate just how many homeownerrs may find themselves in this situation.

Those homeowners need to remember their needs may matter just as much as the financial aspects of their move.

Misinformation in the Media Is Creating Unnecessary Fear

Another thing that’s limiting inventory right now is the fear that’s been created by the media. You have likely seen the negative headlines calling for a housing crash, or the ones saying home prices would fall by 20%. While neither of those things happened, the stories may have dinged your confidence enough for you to think it’s better to hold off and wait for things to calm down.

How This Impacts You

If you are wondering how today’s low inventory affects you, it depends on if you are selling or buying a home, or both.

• For Buyers: A limited number of homes for sale means you will want to seriously consider all of your options, including various areas and housing types. I can help you explore all of what’s available and find the home that best fits your needs.
• For Sellers: Today’s low inventory actually offers incredible benefits because your house will stand out. I can walk you through why it is especially worthwhile to sell with these conditions. And since many sellers are also buyers, I can help you stay up to date on the latest homes available for sale in your area.