It's hardly a secret that the residential real estate market has been starved for listings since late 2020. Not only are everyday homebuyers struggling to get their offers accepted, but even seasoned real estate investors are feeling the strain.
It's common for real estate investors to compete with everyday buyers for homes that can be used as income properties or short-term vacation rentals. But right now, inventory is sitting at a record low. The National Association of Realtors reports that as of the end of December, there were only 910,000 unsold existing homes on the U.S. housing market. That's the equivalent of a 1.8-month supply of houses. It also represents a 14.2% decline from one year prior.
For context, it takes a 4- to 6-month supply of homes to allow for a more equalized housing market -- one where neither buyers or sellers have the advantage. Today's market, however, benefits sellers immensely, which explains why homes prices are up across the board, making things harder for regular buyers and investors alike.
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In December, the median price for existing homes was $358,000. That's a 15.8% jump from December of 2020 when the median price for existing homes sat at just $309,200.
All told, home prices have risen on an annual basis for 118 months in a row. And until more inventory hits the market, home prices are likely to stay elevated.
Will housing inventory pick up in 2022?
A big reason the housing market has lacked supply is that sellers have held off on listing their properties due to factors such as economic uncertainty and the pandemic itself. But while things may be looking up with regard to the former, the same doesn't hold true for the latter.
Right now, we're still in the throes of a COVID-19 surge fueled by the highly transmissible omicron variant. And until those numbers start to come down, listings are likely to remain sluggish.
Furthermore, while the economy is certainly in a stronger place than it was a year ago, that doesn't mean home sellers aren't worried about it. Inflation is causing the cost of everyday goods to soar. And while inflation is actually a measure of a healthy economy, many consumers just don't see it that way. Throw in the fact that omicron disruptions could lead to an uptick in business closures and unemployment claims, and it's easy to see why sellers are skittish.
This isn't to say that more homes won't hit the market at some point in 2022. But should buyers and investors anticipate major movement in the next few months? Probably not. And so those looking to buy in the near term will need to grapple with higher home prices -- and hope that mortgage rates stay competitive enough to make the homes they're buying affordable.
Mortgage rates have risen steadily since the start of 2022. They're still sitting at relatively competitive levels, historically speaking. But if they continue rising, it could create a scenario where everyday homebuyers are pushed out of the market and real estate investors are less motivated to add to their portfolios.
