Inventory Remains a Stubborn Problem In Housing

Written by Ashley Sutphin Posted On Tuesday, 23 May 2023 00:00

For months and months, the housing market in the United States has been seriously lacking in inventory. Sellers continue to have the upper hand in this market, despite the fact that there are signs of problems in the economy.  

While there were buyers who thought they’d wait things out for the past few years as far as buying a new house, they aren’t likely to get much relief any time soon. This year has proven extremely challenging in buying a house because of high mortgage rates and home prices that are staying elevated.

When mortgage rates first started going up, most people thought home prices would drop, at least somewhat.

Unfortunately, while buyer demand isn’t as high as in 2021, prices remain high because the inventory is so limited.

At the end of March, we saw only a 2.6-month supply of homes, according to data from the National Association of Realtors. Typically, a supply of four to six months is needed for there to be enough houses on the market to meet the demands of buyers.

Some buyers have left the market because of higher borrowing rates, but as it stands currently, there are still enough potential buyers out there to keep prices and competition high.

There’s such a limited inventory and more competition among buyers, plus sellers aren’t motivated to lower prices.

Sellers might not be able to get away with extremely elevated prices in the current market, but still, they know that buyers’ options are probably pretty limited, especially if they’re looking for a house in a specific neighborhood where there might only be one or two properties on the market.

So when will there be some relief for people who want to buy?

The inventory will probably stay low and stagnant until mortgage rates go down. Most current homeowners have lower interest rates on their current mortgages because they either originated them when rates were historically low, or they refinanced in 2020 or 2021 to take advantage of those rates.

Now, those people with those low-rate mortgages are hesitant to sell because they’re going to have to get a new mortgage at a much higher rate if they do.

So when will mortgage rates come down? No one knows, and the Federal Reserve has indicated that despite an economic slowdown, they might continue to raise rates.

For the four-week period that ended on April 23, new listings for homes went down 22.4% nationwide. That was one of the biggest drops since the start of the pandemic, says Redfin. found similar numbers—they reported a drop of 20% in newly listed homes for sale versus a year ago in March.

A poll conducted by in February found that around 82% of people who would otherwise want to sell and move up felt trapped by their currently low mortgage rate.

The NAR found around 1/3 of listings are getting multiple bidders, and 28% of properties are selling for above their list price.

Home builders are looking at the situation with a sense of positivity. Home builder sentiment was on the rise in April for the fourth straight month, and around one-third of the inventory right now is new construction. That compares to just over 10%, the typical normal average.

Building company D.R. Horton said in a press release that while higher interest rates and uncertainty about the economy may be ongoing for some time, the availability of new and existing homes at affordable prices is limited, supporting ongoing favorable housing demand.

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