Manny S. Rizzuto

Mortgage Consultant NMLS#: 145229

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Inventory is one of the biggest challenges in the current housing market. As there are more buyers searching for homes, and less sellers looking to list their homes under the current conditions, the market is tipped in the seller's favor. 

According to the National Association of Realtors, the total housing inventory is down by 18.8% compared to this time last year. The new housing supply is not keeping up with the current demand for a variety of reasons. Here’s what you need to know:

1. New Construction Has Slowed Down

Since the housing bubble burst in 2008, we’ve seen a growth in population and demand, but new construction hasn’t been able to keep up. The lack of new and available residences has only been amplified by delays caused by COVID-19 as well. 

While a recent surge of new construction due to reopenings has eased some of the pressure, industry experts agree that builders just simply can’t build fast enough. Limited housing supply has been a concern for many years and COVID-19 has proven that demand will continue to outweigh supply. 

2. Demand is Surging Because of Low Rates

Amidst the pandemic, the market is seeing some of the lowest rates in years. With current rates hovering around 3.5%, many buyers are anxious to get into the market to take advantage. However, the influx of motivated buyers only further exaggerates concerns over low inventory. 

Almost everything housing related, including new home sales, home improvement projects and home prices, are in a V-shaped recovery.  

3. Sellers Aren’t Listing During the Pandemic

Many sellers are reluctant to list their homes during the pandemic. Current homeowners are deciding to stay in their homes and wait until more stable conditions before putting their home up for sale. 

Those that are happy in their homes are more likely to look into refinancing options and are taking advantage of bargain-basement mortgages and other ways to lower their monthly costs so they can invest in home improvement projects instead. 

4. Sellers Aren’t Looking to be Buyers 

Potential sellers are also quick to recognize that the low inventory will affect them, too. Everyone needs a place to live after they’ve sold their home, and finding a new home is definitely more difficult than selling your current one under the current market conditions. 

5. Shift in Demographics

People are staying in their homes an average of 13 years now, up from an average of only 5-7 years before the housing bubble burst. Many homeowners are aiming to recoup their equity, which has justified their longer stays. However, under the current conditions, sellers are in a great position to break the 10-year trend and sell their homes while demand is high and inventory is low. 

6. People Want Larger Homes

Time spent at home during the pandemic has led to an increase in people wishing for more space. However, those that are looking for larger homes may have difficulty in finding one. Homeowners that are currently living in larger homes have less of a need to sell their homes because their square footage requirements are already satisfied and they’re less likely to be looking for an upgrade. 

7. Increased Migration

The COVID-19 pandemic has sparked a trend of people looking to move away from their current locations. As remote work becomes more tangible, people are less concerned about their commute times and have more flexibility in choosing where they want to live. As a result, vibrant suburban and more rural areas have seen an extra influx of potential buyers. The less expensive prices associated with living outside of the city are also an influencing factor as people are able to afford more for less. 

8. The Market isn’t Distressed 

Both the market and equity positions are strong. Because of this, sellers are less likely to be facing foreclosures and short sales, so they don’t have a strong motivation to sell. 

9. Investors Are Buying Up Inventory 

With interest rates remaining notably low, investors are looking to buy up additional inventory. Buyers are now competing against other buyers and other investors as many people have begun to take advantage of the opportunity to secure an investment property. With favorable market conditions and few alternative investment options, it’s no surprise that investors are turning to the real estate market as well. 

With interest rates at a historical low, there are plenty of reasons for sellers to get involved in the housing market. The opportunity for a low monthly payment, additional upgrades, more square footage, and finding the features you’re looking for rather than having to invest in costly renovations, is definitely possible. Both buyers and sellers have a golden opportunity within the housing market, but it’s important to be intentional and competitive in your offerings.