How Does Low Housing Inventory Impact The Real Estate Market

Buying a house is often a one-time exciting life event but many people struggle to find the house of their dreams because of the lack of options available on the real estate market. Low inventory is causing a headache to communities across the country.

To understand this topic better, in this article, we look at the ways low housing inventory impacts the real estate market.

What Is Low Housing Inventory?

In the last couple of years, many people stayed at home to quarantine because of the Covid-19 pandemic. The health crisis forced many people to work remotely from home, and some even lost their jobs altogether. Students switched to remote learning and families suddenly found themselves working and learning in front of their computers at home.

The lifestyle changes left many people reluctant to the thought of selling their homes because they were afraid of what the future would bring. Homeowners who had plans of selling their homes back in 2020 chose not to go ahead with their decision of selling and wait until safer times and more familiar surroundings.

Simultaneously, builders stopped their construction works and lumberyards ceased production of building materials as they had no skilled workforce to generate an inventory. Building supplies were scarce and the prices went through the roof.

Existing homes could not be sold and no new homes were being built. This ultimately resulted in more demand and not enough supply.

What Is the Reason for Low Housing Inventory?

Several key factors play a significant role in low housing inventory. The Covid-19 pandemic brought a lot of lifestyle changes and low-interest rates led many home buyers and sellers in a frenzy.

The record-low mortgage rates were one of the biggest contributing factors. Many homeowners used the opportunity of the dip in the interest rates and refinanced their homes with the decision to stay put in their existing homes.

As time went by, some of them were given the choice to work remotely regularly and many families chose to relocate to more affordable communities. These places are experiencing inventory shortages because of the influx of such remote workers coming to these areas with hefty down payments who could pay over the asking price for homes.

Another significant factor that contributes to low investors is the lack of new builds and the lack of consistency in building supplies and skilled workforce make it close to impossible to generate a profit on entry-level new home sales.

How Does This Impact the Real Estate Market?

Buyers

With record-low interest rates, prospective new homeowners are entering the market with excitement, only to find themselves disappointed.

Fewer homes are put up for sale, often resulting in months of searching, countless showing, and rejected offers. Many buyers have had to compromise on the size and features they’re looking for in their new home but the lack of affordable homes is the biggest challenge they face.

Many homes are selling at a fast pace and far above the asking price. Buyers who have a strict budget have little room for negotiation and repairs.

Sellers

Being a seller is difficult too. A homeowner can sell their home faster and at a higher price, but the struggle starts once they need to find a home that meets all of their needs and in their specific time frame.

Real Estate Investors

This is a great opportunity for experienced real estate investors to better their existing property portfolios.

With the low mortgage rates, it’s a great time to sell investment properties that are not performing as well as others. It’s an opportune time to sell the asset, recover costs and possibly make a profit sooner than expected.

Many landlords take advantage of the rickety housing market and improve their rental listings with repairs or upgrades that match or exceed market standards. Sellers have sold their homes for the most value and want to lease until the market stabilizes.

How Long Will the Housing Shortage Last?

This is not the first time that we’ve seen low housing inventory. Such shortages occur when there’s only a 6-month housing supply and it usually takes 4-6 months to rebuild the real estate market supply.

However, it will take many years before we know the damage done to the housing market caused by the Covid-19 health crisis.

Final Thoughts

Hope should not be lost – you can get guidance and advice from your home loan lender as to what type of properties you can buy and for what price. Lean on an experienced and well-connected real estate agent who will save you a lot of headache and disappointment and give you advice on how to take advantage of current low mortgage rates and buy smart.

Written by Julie Hanson

Julie is passionate about property – development, investment and portfolio planning. Along with husband Alec, Julie is actively building a property portfolio while helping others to do the same.

LEGAL INFORMATION

This site is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. We are compensated for referring traffic and business to Amazon and other companies linked to on this site. We may also do this with other affiliate schemes.

Light up a north facing room x
Light up a north facing room

You May Also Like…

Change Pricing Plan

We recommend you check the details of Pricing Plans before changing. Click Here



£2030 daysPay Per Listing0 regular & 0 featured listings



£4030 daysPay Per Listing0 regular & 0 featured listings



£12030 daysPay Per Listing0 regular & 0 featured listings



£25030 daysPay Per Listing0 regular & 0 featured listings



£2500365 daysPay Per Listing1 regular & 1 featured listings



£600365 daysPay Per Listing0 regular & 0 featured listings



£220365 daysPay Per Listing0 regular & 0 featured listings



£110365 daysPay Per Listing0 regular & 0 featured listings



£1200365 daysPay Per ListingUnlimited regular & Unlimited featured listings



£440360 daysPay Per ListingUnlimited regular & Unlimited featured listings



£220365 daysPay Per ListingUnlimited regular & Unlimited featured listings



£Unlimited daysPay Per Listing1 regular & 0 featured listings