Why Is Housing Supply Still So Low?

That’s the question everyone wants to know… Why is Housing Inventory so Low?  The reality is we are in a seller’s market, and it is very competitive for buyer’s right now.  The number of buyers in the market outweighs the number of homes available for sale.

Here is a look at the 2 primary reasons why the housing supply is low and how it impacts you as homebuyers.

1. New Home Construction Has Not Been Keeping Pace.

The graph below represents single-family new construction during the past 50 years, including time to build.   During the housing crash of 2008 builders exceeded the average time to build, because there was an oversupply of homes at that time that lead to housing prices declining.

Since that time period, noted in red,  builders have not been able to keep up with the pace of demand, for homes (in green).  This underbuilding has left us with a multi-year inventory deficit leading up to the pandemic.

Buyers Want To Know: Why Is Housing Supply Still So Low? | MyKCM

2. The Pandemic’s Relationship with the Housing Market

When the pandemic hit, the meaning of home changed.  The focus changed from having a place to relax, sleep and go to work, changed to having a safe space to live, work, exercise, and enjoy life.  With mortgage rates dropping to at or below 3% buyers hit the market looking to capitalize on low rates and find a home that fulfilled their evolving needs.  As the buyers were ready to buy, sellers hesitated to sell.  Additionally, new construction materials dramatically increased in price due to limited supply, and became harder to source thus driving new construction prices higher and taking longer to build.

The result? The number of homes available for sale dropped even further. A recent article from realtor.com explains:

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. . . .”

How does this impact you?

For a buyer, low inventory will be challenging as buyer’s will not want to settle on their home dreams, but currently there just aren’t that many homes to choose from.

Some good news for homebuyers.  More homes are hitting the market and more sellers will continue to re-enter the market.   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.

Summary, inventory is still low, but there are more gulf coast homes hitting the market.  So don’t put your plans on hold, continue to stick with your search.  You can find your next home if you’re patient and focused. Share your search priorities with your agent and be clear about your priorities.  Your local agent should be a trusted advisor and your greatest support to navigate today’s housing market to find the home of your dreams.

Bottom Line 

If you are planning to buy this year, patience and a local agent that knows the market will be there to guide you.  Let’s connect and discuss what’s happening in the coastal market, what homes are available, and prioritize your home search today.  Call A Carter, Cathy Carter.