The housing market has recently seen startlingly low housing inventory. According to data from Altos Research, the number of homes currently on sale has dropped by about half from last winter. The drop is seen most prominently in metropolitan areas such as Atlanta, New York, Austin, and Chicago. Data from the National Association of Realtors shows that total housing inventory fell 29.5% from February 2020.
The ongoing COVID-19 pandemic is to blame for much of the low housing inventory – low interest rates and the generalized need for larger housing and the subsequent move to the suburbs have greatly increased demand. However as demand has risen, so have home prices. The median home price for all housing types in February was $313,000, up 15.8% from a year prior. Home affordability has been impacted. While additional stimulus packages are expected to help ease the burden, Lawrence Yun, NAR’s chief economist suggested that an increase in inventory is the best way to combat surging prices.
Experts are also suggesting that low housing inventory has actually been occurring for quite some time now. Overall, less housing has been built compared to historical averages. Factors such as tightening restrictions on building and immigration policies further hindered new construction pre-pandemic. Now in a post-COVID world, the effect is being felt much more. Sellers are reluctant to list their homes due to concerns over the exposure that comes with the selling process (open houses, etc.) Ralph McLaughlin, the chief economist at Haus, suggests that this phenomenon is contributing to a self-reinforcing cycle: “Every additional home that gets pulled off the market incentivizes someone else to not sell their house.”
The market is likely to remain competitive in the near future. Planning for low housing inventory best way to realize homeownership dreams. If you are a prospective homebuyer, be prepared to face tight supply. The best thing to do is get pre-qualified. Better yet, get pre-approved: this shows the seller that you are serious about making the purchase and that you are financially capable of meeting the price.