Everyone trying to buy in this very competitive housing market wants to know: when will the total inventory available rise?
Inventory shortages are at the heart of the unprecedented sellers market that has prevailed since COVID-19 first began. What was initially driven by fears of trying to sell while maintaining social distance has morphed into concerns about being able to find an affordable house to buy while selling your current home.
After all, in many markets around the United States, homes listed on the market are receiving multiple offers on the first day they’re on the market. Cash offers are common and above-asking-price offers happen frequently as well. Sellers can get incredible deals.
However, for anyone who is selling and needing to buy a home next, they must face the challenging circumstances that other sellers are facing. Houses are vanishing from the market so quickly that they’re forced to create a compelling offer whenever a house that meets their standards is available. Those compelling offers can sometimes be higher than the property is really worth to them, and at the edge of what they can get financed.
Unlocking more inventory – i.e. driving more sellers into the market – could do a lot to bring prices back into check. Even though some sellers would probably be sad to see the high prices go, they’ll be relieved when they themselves are buying.
The whole economy does better when people are paying what they really think is the value of the house, selected from good options, rather than locking themselves into high mortgages that they aren’t sure reflect the long-term value of the home.
At least in the past, all seller’s markets were eventually followed by a buyer’s market. One lever that could initiate a trend of jumping into the market is an interest rate hike. Interest rates going up will lower the impulse to move for some buyers, who won’t be able to afford quite as expensive a home with a higher interest rate.
If interest rates start shifting up, top real estate agents who were surveyed by HomeLight predict that some groups of potential sellers will jump into the market specifically to catch the tail end of this seller’s market.
If they wait much longer after that, they could miss out on that ultra-high selling price that so many others have gotten this past year.
Ironically, all those “fear of missing out” sellers will accelerate our path to a buyer’s market: more homes on the market mean that buyer’s have more choices and won’t be offering quite as aggressively just to get any home at all.
There are a variety of groups of sellers who have also been slowly entering the market simply because the seller’s market has gone on for so long and they aren’t sure when it will end. These groups are dominated by people who don’t need to immediately buy a home of a similar cost once they sell: empty nesters and retirees, for example, are all-too-excited to sell at a premium and move into a smaller or less expensive retirement home, especially if they are close to retirement but can move now while working remotely. Others who have seen a big jump in property value and want to ‘cash out’ that value and return to renting are seeing the benefits of going ahead and selling at the top of the market.
It remains to be seen when, exactly, enough FOMO on the part of sellers will usher in a time of greater inventory and better buyer options in the future.