Housing Inventory Remains Low
4 Apr 2017

The largest obstacles facing homebuyers in today’s market are low inventory, home prices, and interest rates. Housing affordability is the key to helping break yet another year of gridlocked inventory, but all signs are showing that homes this spring will be in high demand.

The foreclosure crisis is over, but it left behind an entirely new landscape for potential buyers. Entry-level homes are scarce because investors bought tens of thousands of them during the crisis and turned them into rentals. The number of single-family rentals jumped to more than 15 million, up from about 11 million in 2009, according to the U.S. Census.

Soaring stock markets, still-low mortgage rates, and a steady economy has energized homebuyers from the start of the year. Now that Spring has arrived you can bet that there will not be a decline in momentum. However, this uptick in homebuyer enthusiasm does not guarantee strong sales in the coming months. Pending home sales are down across the country despite strong demand.

Experts agree that sales volume will begin to pick up steam in 2018 through 2021 as turnover rates are expected to see a dramatic rise. It is anticipated that retiring Baby Boomers will be buying replacement homes and Generation Y’rs will be a formidable force in the form of first time homebuyers.

Currently, home sellers are reaping the benefits from the perfect storm of market conditions, but as the ongoing low inventory levels and drop in pending sales indicate, there simply are not enough homes to meet the demand of buyers.

Higher home prices in some areas are supported by improving local economies and employment, but in other markets, too much demand pitted against too little supply is resulting in overheated housing. What many don’t realize is that while a lack of inventory might help a seller get more for their home, they too have to purchase a new one. In some cases low inventory is preventing some potential sellers from listing in fear they might not be able to find their next dream home.

Interest rates are still at historic lows even as the Federal Reserve just introduced another rate hike. This is the third time the Fed has raised rates since the financial crisis. The first hike came at the end of 2015, the second almost exactly one year later followed by the most recent one in March.

Compare