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How Low Is Too Low? Home Inventory Explained

Are you worried about home prices crashing? There’s one crucial factor that’s currently limiting just how low home prices will go, and that’s the inventory of homes for sale. At present, the supply of homes for sale remains low, and there’s upward pressure on home prices due to eager buyers having to compete for the limited supply of homes on the market. This drives prices up and is one of the primary reasons we’re not going to see home prices come crashing down nationwide. However, concerns are still valid, and experts are of the view that this inventory shortage is not likely to change anytime soon.

1. The Impact of COVID-19 on the Real Estate Market Inventory

There’s no question that the real estate market is volatile and that there are a lot of uncertainties lurking around the corner. The best way to be prepared, however, is to know what the current state of affairs is and what may happen in the immediate future.

According to recent reports, the current inventory of homes for sale is still conspicuously low. While the factors that cause inventory shortage are multifaceted, one major reason is the COVID-19 pandemic, which has caused a notable slowdown in construction and supply chain. Another factor is that, in the wake of the pandemic, many homeowners are choosing to stay put instead of putting their homes on the market.

2. The Effects of Limited Home Inventory on the Real Estate Market

What happens when there aren’t enough homes available for sale? Generally speaking, when an item has a limited supply, the demand for it increases. This could be seen as simple economics. In the real estate market, when there’s a limited supply of homes, eager buyers have to compete for the limited supply of houses on the market, driving prices up. Conversely, when supply exceeds demand, the number of homes available for purchase compels sellers to lower their price to attract buyers. However, this is not the case presently.

3. Experts Predict No Immediate Solution to the Real Estate Inventory Shortage

Experts agree that the inventory shortage is a problem that isn’t likely to change anytime soon. The excitement surrounding record low interest rates, high competition among Home Buyers, and other economic indicators are unlikely to lead to a significant boost in housing supply. In fact, according to Redfin, housing starts have only increased 2% compared with last year, which is slower than Home Buying demand.

So, what does this mean? Home prices are always going to fluctuate between markets. Some areas may observe slight declines, while others may witness prices climbing higher. However, home prices are not likely to crash nationwide.

Conclusion:

In summary, it’s essential to keep an eye on the inventory of homes for sale when evaluating house prices. The factors that cause inventory shortage are multifaceted, but the primary reason is the COVID-19 pandemic. This eliminates potential sellers and restricts new construction, which slows down supply. It’s unlikely that the housing shortage will end anytime soon, which could continue to drive home prices up across the country.

If you’re looking for guidance navigating the competitive real estate market, reach out to Spectrum Real Estate Consultants Team for expert advice and personalized service. Contact us today to learn how we can help you make the most of your Home Buying or selling experience.

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