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Why Is Housing Inventory So Low?

Why Is Housing Inventory So Low? Simplifying The Market

One question thats top of mind if youre thinking about making 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, thats probably not the best strategy. Heres why.

There arent enough homes available for sale, but that shortage isnt just a today problem. Its been a challenge for years. Lets 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 havent been building enough homes in recent years. The graph below shows new constructionfor single-family homes over the past five decades, including the long-term average for housing units completed:

For 14 straight years, builders didnt 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 isnt going to be solved overnight.

Todays Mortgage Rates Create a Lock-In Effect

There are also a few factors at play in todays 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 dont want to move and take on a rate thats higher than the one they have on their current home. The chart below helps illustrate just how many homeowners 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 thats limiting inventory right now is the fear thats been created by the media. Youve 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 its better to hold off and wait for things to calm down. As Jason Lewris, Co-Founder and Chief Data Officer atParcl,says:

In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.

Thats further limiting inventory because people who would make a move otherwise now feel hesitant to do so. But the market isnt doom and gloom, even if the headlines are. An agent can help you separate fact from fiction.

How This Impacts You

If youre wondering how todays low inventory affects you, it depends on if youre selling or buying a home, or both.

  • For buyers: A limited number of homes for sale means youll want to seriously consider all of your options, including various areas and housing types. A skilled professional will help you explore all of whats available and find the home that best fits your needs. They can even coach you through casting a broader net if you need to expand your search.
  • For sellers: Todays low inventory actually offers incredible benefits because your house will stand out. A real estate agent can walk you through why its especially worthwhile to sell with these conditions. And since many sellers are also buyers, that agent is also an essential resource to help you stay up to date on the latest homes available for sale in your area so you can find your next dream home.

Bottom Line

The low supply of homes for sale isnt a new challenge. There are a number of long-term and short-term factors leading to the current inventory deficit. If youre looking to make a move, connect with a real estate agent. That way youll have an expert on your side to explain how this impacts you and whats happening with housing inventory in your area.

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