To call the current real estate landscape in our area “competitive” would be an understatement. From topping national rankings as an extremely desirable place to live to having exceptional school districts, our local communities have cultivated an exceptional quality of life that draws eager prospective residents from far and wide. This immense popularity is one major factor contributing to the inventory crisis in today’s housing market. With substantially more interested buyers in the market than homes available for sale, home prices have skyrocketed statewide as buyers compete fiercely for the limited supply.
How is “inventory” determined?
Real estate professionals answer a hypothetical question when determining the absorption rate for the current inventory of homes for sale:
“How long would it take to sell every listed home if no new homes came on the markHowever, today’s real estate landscape is far from balanced. As of November 2022, the national months of inventory figure sits at a paltry 3.3 months — a full month lower than the 4.4 months recorded just a year ago. Locally, the situation is even more severe, with some metro areas having less than 1 month of inventory for eager homebuyers vying for listings. Although the inventory has been slowly increasing, incremental month-by-month since December 2022, the market still has a considerable way to go before reaching an optimal inventory level. For now, conditions remain solidly in sellers’ market territory.In the real estate world, the relative balance between supply and demand in a housing market can be measured by a figure called “months of inventory.”
Essentially, this calculation determines how long it would take for the entire current stock of homes on the market to sell, given the recent pace of sales, if no additional new listings entered the pipeline. A balanced market with sound fundamentals is typically defined as having around 5-6 months of inventory available. This indicates a healthy equilibrium where buyers have adequate options and neither sellers or buyers have an extreme upper hand in negotiations.et?”
Finding the answer requires using a specific calculation that results in a “months of inventory” figure.
As of this writing, U.S. Existing Home Months’ Supply is at 3.30, which is up from 3.10 the previous month. In fact, the inventory of available homes has been steadily increasing, month over month, since December of 2022, according to research from the National Association of REALTORS.
Most real estate professionals agree that an inventory of 5 or 6 months is a sign of a balanced housing market. We still have a way to go to reach either of those numbers, but the steady increase over the past 10 months is encouraging for homebuyers.
This is where we are right now – a market that still favors sellers, but is in flux. If you hope to take advantage of the sellers’ market, jump in soon.
Why are there so few homes for sale?
This perpetual shortage of homes for sale stems from a few key structural factors converging simultaneously in recent years:
- Surging Demand: The pandemic ushered in a seismic shift of homebuyer demand as remote work opportunities enabled urban dwellers to relocate and existing homeowners searched for larger spaces. Divorced spouses entering the market concurrently further intensified buyer traffic.
- Construction Obstacles: From labor shortages to supply chain issues, the pandemic also constrained new construction despite heightened buyer interest. Permitting and development hurdles have likewise slowed building.
- Investor Purchases: Large institutional investors like BlackRock along with everyday small-scale investors have flooded the market, scooping up homes en masse to convert to lucrative rental properties. Bulk offers well above asking prices edge out regular homebuyers.
- Imbalanced Incentives: Record low mortgage rates have catalyzed purchasing power precisely when inventory is lowest and competition fiercest. Meanwhile, existing homeowners are disincentivized to sell due to capital gains taxes and losing their own low rates.
- Mortgage interest rates: Not only are rates higher than they’ve been in some time, but folks who bought when they were super low are reluctant to sell. As Holden Lewis at NerdWallet.com explains, “…homeowners don’t want to give up their low mortgage rates.”
- Baby boomers (born between 1946 and 1964): Our older generation is taking much of the blame. Surveys find that the majority of these 33 million owner-occupant baby boomer homeowners have decided to age in place. Plus, they are concerned about losing their current low rate if they sell and buy another home.
The combination of these factors sustaining heightened demand while severely limiting supply has cultivated the treacherous conditions facing buyers in today’s market. With no quick fixes in sight, the inventory drought seems poised to intensify heading into the springs selling season. Eager buyers may want to act quickly this winter before competition reaches a fever pitch. Stay tuned for more market analysis on navigating these unprecedented conditions.
Don’t Delay – Now is the Time to Sell
If you’re considering selling your home, there’s no better time than the present. With mortgage rates on the rise, the pool of available buyers is slowly shrinking as some are priced out of the market. The longer you wait, the more likely it is that prices and demand could start to cool off.
Right now, home values in our area are still at record highs, and competition for listings is fierce with buyers eager to purchase. You stand to maximize your sale price if you list your house while the market remains red-hot. Simply put, you may never see better conditions for selling than we have right now.
We know one top concern that holds many homeowners back is worrying that they won’t be able to find a suitable home to move into if they sell their current house. The process of buying a new place while having your home on the market can be complicated. But rest assured, we have creative solutions to make this transition much smoother for you.
If you have any other questions about navigating the real estate landscape in our thriving market, please reach out. We absolutely love talking real estate and are happy to offer our guidance! This prime selling window may not last forever, so act now if you’re ready. Let us help you capitalize on today’s ideal conditions.
