What the Current Housing Supply Means for Sellers

Published on August 30, 2021
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We are witnessing an interesting time in real estate with the shortage of the supply of homes on the market. There are more buyers searching for homes than there are homes available to purchase. With housing supply being so low, sellers are in the driver’s seat. In this current climate, your home will get more attention, more offers, and more favorable negotiations in the deal. Although the pandemic has affected the current market, the low supply of homes was building for years. With restrictions lessening and life opening back up, you may be questioning, will these market conditions change soon?

Let’s take a closer look at the root cause of the inventory shortage and what we can look forward to in the future to uncover the best possible time to sell!

Where Did the Shortage Originate?

The high buyer demand has been a strong force in this low inventory market, but what is the true reason we are experiencing record low supply levels? The number of new homes built recently, is a strong indication of the low housing supply. The VP & Chief Economist at Freddie Mac, Sam Khater, explains this phenomenon:

“The main driver of the housing shortfall has been the long-term decline in the construction of single family homes.”

Historically, we have seen builders complete an average of 1.5 million new housing units per year. Unfortunately, since the housing bubble in 2008, the level of new construction homes has fallen off. We are witnessing an increase in new houses built since then, but the levels are still not comparable to the long term average. 

The NAR elaborates on the impact of this slower pace of construction:

“… the underbuilding gap in the US totaled more than 5.5 million housing units in the last 20 years. Looking ahead, in order to fill an underbuilding gap, new construction would need to accelerate to a pace that is well above the current trend, to more than 2 million housing units per year.”

Even if we continue to build more new houses than the norm every year, it’ll still take a decade to close the underbuilding gap. The good news is that we are experiencing an increase in new home construction, but it is still not enough to bridge the gap. In the State of the Nation’s Housing 2021 Report, the Joint Center for Housing Studies of Harvard University (JCHS) says:

“…Although part of the answer to the nation’s housing shortage, new construction can only do so much to ease short-term supply constraints. To meet today’s strong demand, more existing single-family homes must come on the market.”

Don’t Worry! More Existing-Home Inventory Is on The Way

The latest reports signal that housing supply is growing gradually as we progress month to month. There is hope as we move forward, as signs show that existing homes for sale are beginning to shift. Lawrence Yun, Chief Economist at NAR, echoes this sentiment:

“As the inventory is beginning to pick up ever so modestly, we are still facing a housing shortage, but we may have turned a corner.”


Bottom Line

What does this mean for you? It’s not too late to take advantage of today’s sellers’ market and use rising equity and low interest rates to make your move into your dream home. It’s still an amazing time to sell! Even though housing supply is starting to trend up, it’s still hovering near historic lows. Connect with a trusted Seven Gables Advisor today!