Low Housing Inventory Slows Real Estate Recovery

Posted on June 5, 2013 | Back to blog


Across the nation the number of homes for sale is at such a low level that the United States hasn’t seen this type of a shortage for decades. This means that it’s a seller’s market. Homes are only staying on the market for a brief amount of time and in many cases, multiple offers are coming in. This type of market makes it a bit more difficult for buyers to get a good deal on a home. A market with limited inventory is also slowing the real estate recovery as a whole.

In order to explain why low housing inventory isn’t necessarily a good thing for recovery, let’s take a look at the reason we are seeing a housing shortage to begin with. Part of the reason that demand for homes is so strong right now is that a person who loses their home due to foreclosure typically has to wait about three years before they can financially qualify for a new home loan. This means that if someone lost their home around 2009, now is the time that they are starting to look for new home. Also, a low housing inventory means that prices of homes are going up. This allows people who still owe money on their homes to feel more comfortable about selling their homes now.

The few homes that are on the market right now are selling very quickly but since the number of homes is so limited, that means home sales are slower than they would be if the market were more saturated with available homes. The limited number of homes also slows sales down because buyers aren’t able to find what they want. Experts say the lack of options is turning many potential homebuyers away. They don’t want to make a major investment unless they are able to find exactly what it is they want. A low housing inventory is also slowing down buyers because they don’t want to be caught in a bidding war. A surplus of buyers is allowing sellers to push the price of their home above asking price. If buyers aren’t prepared to pay more than the asking price, this means they aren’t able to afford many of the current options on the market.

Although the current housing inventory is slowing recovery process, experts say it shows signs of balancing out in the future. With the price of homes going up, more sellers will be motivated to put their homes on the market, which will increase the housing inventory. This will give buyers more options and potentially lower housing prices. If you are a buyer, you might want to wait until this happens before you start house hunting. If you are a seller, you’ll want to list quickly while you still have a chance of setting a high price for your home.

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