The Dilemma of Low Housing Inventory Explained

If you're currently in the market for a new home, you've probably asked yourself this burning question: Why is it so darn hard to find a house these days? It's a valid concern, and while the temptation to wait for better options is understandable, it might not be your best strategy. Let's dive into the reasons behind this scarcity.

Long-Term Underbuilding Woes

One significant factor behind the shortage of available homes is a long-standing issue – builders simply haven't been constructing enough houses in recent years. To illustrate this, just take a look at the graph below, which shows new construction for single-family homes over the last half-century. You can see that for 14 consecutive years, builders failed to meet the historical average (indicated in red). This chronic underbuilding has left us with a considerable deficit in inventory. Although new construction is now picking up and aligning with the historical average, it's clear that the inventory problem won't be resolved overnight.

The Mortgage Rate Dilemma

The present-day housing market has its own set of challenges contributing to the inventory crunch. One of these is what we call the "mortgage rate lock-in effect." Essentially, some homeowners are hesitant to sell because they're locked into attractive mortgage rates. They're afraid that moving would mean accepting a higher rate on their new home, which they'd rather avoid. However, it's crucial to remember that your housing needs are just as important as financial considerations.

Media Misinformation Adds to the Mix

Another factor limiting housing inventory today is the fear that's been propagated by the media. You've probably come across alarming headlines predicting a housing crash or drastic price drops of 20% or more. Thankfully, neither of these dire predictions came to pass, but the negative news might have cast doubt on your plans. As Jason Lewis, Co-Founder and Chief Data Officer at Parcl, aptly puts it:

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

These headlines are further contributing to the inventory shortage, as people who would otherwise make a move are now second-guessing themselves. But remember, the market isn't as bleak as the headlines suggest. Real estate professionals can help you sift through the facts and dispel the fiction.

What This Means for You

So, how does this all impact you? Well, it depends on whether you're buying or selling, or perhaps even doing both.

- For buyers: With a limited supply of homes on the market, it's crucial to explore all your options, including different neighborhoods and housing types. An experienced professional can guide you through this process and help you cast a wider net if necessary.

- For sellers: Surprisingly, the low inventory actually works in your favor. Your home will stand out in a crowd. A real estate agent can explain why selling under these conditions can be especially lucrative. Plus, since many sellers are also buyers, an agent can keep you updated on the latest homes available in your desired area, making it easier to find your next dream home.

The shortage of homes for sale isn't a new issue. It's the result of a mix of long-term and short-term factors. If you're considering a move, reach out to us. We can provide expert insights on how this affects you and keep you informed about the housing inventory situation in your area. Let's connect and navigate this challenging market together.