The US housing market has been on a roller coaster ride over the past years, with the COVID-19 pandemic leading to a surge in demand for homes as people sought to escape city living and work from home. The resulting rise in demand has led to a shortage of homes for sale, with inventory levels at record lows in many parts of the country. This has created a highly competitive market for homebuyers, with bidding wars and high prices becoming the norm.
The current US homes-for-sale inventory levels are the lowest they have been in decades. The inventory of existing homes for sale at the end of December 2021 was 1.54 million, down 12.7% from the previous year. This represents a 1.3-month supply at the current sales pace, the lowest level since the National Association of Realtors started tracking the data in 1982.
The monthly housing supply will return to a more conventional level as the number of days on the market rises. Although the total housing supply fell short of 1 million units, at 970,000, it was higher than the 880,000 units recorded in 2022.
What is causing the shortage of homes for sale?
According to realtors in Raleigh, NC, the shortage of homes for sale is due to several factors. One is the lack of new construction, impacted by rising lumber and other material costs, labor shortages, and supply chain disruptions. This has led to delays in new home construction, making it difficult for builders to keep up with demand.
Additionally, many homeowners are staying put due to the low mortgage rates.
The shortage of homes for sale is most acute in the affordable price ranges, with homes priced under $250,000 in high demand and short supply. This is due to the limited new construction in this price range, the difficulty of finding affordable land to build on, and the fact that many existing homes in this price range are older and need significant renovations.
What does the future look like?
Looking ahead, it is unclear when inventory levels will return to normal. While new construction is expected to increase in the coming years, it will take time to catch up with demand, particularly in the affordable price ranges. The reluctance of current homeowners to sell may also continue, particularly if mortgage rates remain low and the economic uncertainty continues to disrupt the housing market.
In the meantime, buyers must be prepared for a highly competitive market with limited inventory and high prices. Working with an experienced real estate agent and getting pre-approved for a mortgage can help buyers be more competitive and increase their chances of finding a home in this challenging market.
The current US homes for sale inventory levels are at historic lows, with limited new construction and a reluctance among homeowners to sell, contributing to the shortage of homes for sale. This has created a highly competitive market, with high prices and bidding wars becoming the norm. While it is unclear when inventory levels will return to more normal levels, buyers can take steps to be more competitive and increase their chances of finding a home in this challenging market.