Hope Is on the Horizon for Today’s Housing Shortage
According to the Existing Home Sales Report from the
National Association of Realtors (NAR):
“Total housing inventory at the end of April amounted to
1.16 million units, up 10.5% from March’s inventory and down 20.5% from one
year ago (1.46 million). Unsold inventory sits at a 2.4-month supply at the
current sales pace, slightly up from March’s 2.1-month supply and down from the
4.0-month supply recorded in April 2020. These numbers continue to represent
near-record lows.”
Basically, while we are seeing some improvement, we’re still
at near-record lows for housing inventory (as shown in the graph below). Here’s
why. Since the pandemic began, sellers have been cautious when it comes to
putting their homes on the market. At the same time that fewer people are
listing their homes, more and more people are trying to buy them thanks to
today’s low mortgage rates. The influx of buyers aiming to capitalize on those
rates are purchasing this limited supply of homes as quickly as they’re coming
to market.
This inventory shortage doesn’t just apply to existing homes
that are already built. When it comes to new construction, builders are trying
to do their part to bring more newly built homes into the market. However, due
to challenges with things like lumber supply, they’re also not able to keep up
with demand. In their Monthly New Residential Sales report, the United States
Census Bureau states:
“The seasonally‐adjusted estimate of new houses for sale
at the end of April was 316,000. This represents a supply of 4.4 months at the
current sales rate.”
Sam Khater, Chief Economist at Freddie Mac, elaborates:
“In the span of five decades, entry level construction
fell from 418,000 units per year in the late 1970s to 65,000 in 2020.
While in 2020 only 65,000 entry-level homes were
completed, there were 2.38 million first-time homebuyers that purchased homes.
Not all renters looking to purchase their first home were in the market for
entry-level homes, however, the large disparity illustrates the significant and
rapidly widening gap between entry-level supply and demand.”
Despite today’s low inventory, there is hope on the
horizon.
Regarding existing home sales, Sabrina Speianu, Senior
Economic Research Analyst at realtor.com, explains:
“In May, newly listed homes grew by 5.4% on a
year-over-year basis compared to the earlier days of the COVID-19 pandemic last
year…
In May, the share of newly listed homes compared to
active daily inventory hit a historical high of 44.4%, 17.3 percentage points
higher than last year and 15.1 percentage points above typical levels seen in
2017 to 2019. This is a reflection of quickly selling homes and, for buyers, it
means that while they can expect fresh new listings every week, they will have
to be prepared to move quickly on desirable homes.”
As for newly built homes, builders are also confident about
what’s ahead for housing inventory. Robert Dietz, Chief Economist at the
National Association of Home Builders (NAHB), shares:
“Builder confidence in the market remains strong due to a
lack of resale inventory, low mortgage interest rates, and a growing
demographic of prospective home buyers.”
Things are starting to look up for residential real estate
inventory. As the country continues to reopen, more houses are likely to be
listed for sale. However, as long as buyer demand remains high, it will take
time for the balance between supply and demand to truly neutralize.
Bottom Line
Although it may be challenging to find a house to buy in
today’s market, there is hope on the horizon. Let’s connect to talk about your
home search so we can find your dream home this summer.
Source: Real Estate with Keeping Current Matters
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