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A Look at Housing Supply and What It Means for Sellers

A Look at Housing Supply and What It Means for Sellers | Simplifying The Market

One of the hottest topics of conversation in todays real estate market is the shortage of available homes. Simply put, there are many more potential buyers than there are homes for sale. As a seller, youve likely heard that low supply is good news for you. It means your house will get more attention, and likely, more offers. But as life begins to return to normal, you may be wondering if thats something that will change.

While it may be tempting to blame the pandemic for the current inventory shortage, the pandemic cant take all the credit. While it did make some sellers hold off on listing their houses over the past year, the truth is the low supply of homes was years in the making. Lets take a look at the root cause and what the future holds to uncover why now is still a great time to sell.

Where Did the Shortage Come From?

Its not just todays high buyer demand. Our low supply goes hand-in-hand with the number of new homes built over the past decades. According to Sam Khater, VP and Chief Economist at Freddie Mac:

The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.

Data in a recent report from the National Association of Realtors (NAR) tells the same story. New home construction has been lagging behind the norm for quite some time. Historically, builders completed an average of 1.5 million new housing units per year. However, since the housing bubble in 2008, the level of new home construction has fallen off (see graph below):A Look at Housing Supply and What It Means for Sellers | Simplifying The MarketThe same NAR report elaborates on the impact of this below-average pace of construction:

. . . theunderbuilding gap in the U.S. totaled more than 5.5 million housing units in the last 20 years.

Looking ahead, in order to fill an underbuilding gap of approximately 5.5 million housing units during the next 10 years, while accounting for historical growth, new construction would need to accelerate to a pace that is well above the current trend, to more than 2 million housing units per year. . . .

That means if we build even more new houses than the norm every year, itll still take a decade to close the underbuilding gap contributing to todays supply-and-demand mix. Does that mean todays ultimate sellers market is here to stay?

Were already starting to see an increase in new home construction, which is great news. But newly built homes cant bridge the supply gap were facing right now on their own. In the State of the Nations Housing 2021 Report, the Joint Center for Housing Studies of Harvard University (JCHS) says:

Although part of the answer to the nations housing shortage, new construction can only do so much to ease short-term supply constraints.To meet todays strong demand, more existing single-family homes must come on the market.

Early Indicators Show More Existing-Home Inventory Is on Its Way

When we look at existing homes, the latest reports signal that housing supply is growing gradually month-over-month. This uptick in existing homes for sale shows things are beginning to shift. Based on recent data, Odeta Kushi, Deputy Chief Economist at First American, has this to say:

It looks like existing inventory is starting to inch up, which is good news for a housing market parched for more supply.

Lawrence Yun, Chief Economist at NAR, echoes that sentiment:

As the inventory is beginning to pick up ever so modestly, we are still facing a housing shortage, but we may have turned a corner.

So, what does all of this mean for you? Just because life is starting to return to normal, it doesnt mean you missed out on the best time to sell. Its not too late to take advantage of todays sellers market and use rising equity and low interest rates to make your next move.

Bottom Line

Its still a great time to sell. Even though housing supply is starting to trend up, its still hovering near historic lows. Lets connect to discuss how you can list your house now and use the inventory shortage to get the best possible terms for you.

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