Media Fear vs. Real Estate Reality
Why Is Housing Inventory So Low?
One question that often crosses the minds of those considering a move today is: Why is it so challenging to find a house to buy? While the idea of waiting for more options might seem tempting, it's not necessarily the best strategy. Let's delve into why housing inventory is currently limited and explore both long-term and short-term factors contributing to this scarcity.
Long-Standing Issue of Underbuilding
A significant reason behind the shortage of housing inventory is the historical underbuilding of homes. Over the past five decades, the construction of single-family homes has not kept up with the long-term average. For 14 consecutive years, builders did not construct enough homes to meet the historical average. This persistent underbuilding created a considerable inventory deficit. Although new home construction is currently on par with the historical average, it's crucial to recognize that the long-term inventory problem won't be resolved overnight.
Mortgage Rate Lock-In Effect
In today's market, several factors are exacerbating the inventory challenge. The first is the "mortgage rate lock-in" effect. Some homeowners are hesitant to sell due to the current mortgage rates. They are reluctant to move and acquire a higher rate than what they have on their current home. Homeowners should consider that their needs are just as important as the financial aspects of their move.
Media-Driven Fear and Misinformation
Another factor contributing to limited inventory is the fear instigated by media reports. You may have come across negative headlines predicting a housing crash or a 20% drop in home prices. While neither of these scenarios unfolded, such stories may have eroded your confidence and led you to postpone your plans, waiting for things to stabilize. As Jason Lewis, Co-Founder and Chief Data Officer at Parcl, explains:
"In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt."
This fear-driven hesitation is further reducing housing inventory, as many individuals who might have otherwise made a move are now reluctant to do so. However, it's important to note that despite alarming headlines, the real estate market isn't all doom and gloom. A real estate agent can help you discern facts from fiction.
How This Impacts You
The impact of today's low inventory varies depending on whether you're buying or selling a home, or possibly both.
For Buyers: With a limited number of homes for sale, it's crucial to explore all your options, including different areas and housing types. A knowledgeable professional can assist you in thoroughly exploring available choices and finding a home that perfectly suits your needs. They can also guide you if you need to broaden your search.
For Sellers: Surprisingly, the low inventory currently presents incredible advantages for sellers because your property will stand out. A real estate agent can walk you through why it's especially advantageous to sell under these conditions. Additionally, since many sellers are also buyers, your agent can help you stay informed about the latest homes available for sale in your area so you can find your next dream home.
Bottom Line
The shortage of homes for sale isn't a recent problem. Multiple long-term and short-term factors have contributed to the current inventory deficit. If you're considering a move, don't hesitate to connect with us. Having an expert on your side can provide insights into how this situation impacts you and keep you informed about the housing inventory trends in our area.
