The real estate market is unlike anything we have ever experienced in the past with more buyers looking to purchase than there are homes available to buy. The supply is having trouble keeping up with the demand for houses. In the normal market, there is generally a 6-month supply of homes for sale. Anything more than this 6-month timeframe would be considered a buyers’ market, but this is not the case today. We are currently situated in a very strong sellers’ market with inventory sitting below the norm.
Current Inventory Levels:
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.”
To summarize the current levels, while we are seeing some improvement, we’re still at near-record lows for housing inventory. 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 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 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 for buyers, which means that while they can expect fresh new listings every week, they will have to be prepared to move quickly on desirable homes. 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, and we can all remain hopeful for what the future holds. 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.