A Lean Spring Housing Market Could Make Buying a Challenge

A lack of housing inventory has been hurting home buyers. Will they continue to feel the pain into spring?

Though it's possible to buy a home at any point during the year, most listings typically hit the market in the spring. For one thing, many sellers like to list their homes at a time when the weather is cooperative so that open houses and showings aren't continuously rescheduled. Also, listing a home during spring means getting to better highlight its curb appeal -- something that's difficult to show off during prolonged periods of snow and slush. And since a lot of prospective home buyers need evening showings that don't conflict with their jobs, having more hours of daylight makes the entire process easier.

This spring, however, may prove to be an exception with regard to housing inventory. And that's something buyers will need to brace for.

A lean market means tough times for buyers

Housing supply has sat at record lows for months, as many sellers have held off on listing their homes in the course of the pandemic. And low inventory, combined with attractive mortgage rates, has made it difficult for buyers to be successful in today's market due to the competition.

Many buyers are finding that they're priced out of neighborhoods they could once afford. Others are losing homes to bidding wars with other buyers.

For months, the hope has been that housing inventory will pick up in spring, but unfortunately, we can't count on that happening. As of the end of February 2021, there were roughly half as many homes available for sale as there were in February the year before. In fact, during the first two months of 2021, there were about 207,000 fewer homes for sale than what inventory has averaged during that time over the past four years. And to catch up to normal spring inventory levels, housing supply will need to grow by 25% annually in March and April. Given where we're at in terms of the pandemic, that's unlikely to happen.

The result? While housing inventory may, and should, pick up somewhat once the weather warms, buyers should not expect the typical selection of homes they'd normally find at this time of the year. As such, anyone looking to buy should prepare for home prices to stay high -- and for a battle with other potential buyers.

But there are a few things prospective buyers can do to give themselves an edge in the coming months. For one thing, it pays to seek out mortgage pre-approval, as that's a good way to appeal to sellers who don't want to risk accepting an offer from a buyer whose mortgage may fall through. To be clear, pre-approval doesn't guarantee a mortgage, but it makes it more likely that a buyer will get the financing needed to close on a sale.

Prospective buyers should also run some numbers with a mortgage calculator to see how much house they can reasonably afford. And keep in mind that many homes on the market will inevitably end up requiring offers well above their asking prices. Having a budget to work with can help buyers hone in on the right homes -- and avoid succumbing to pressure at a time when the pickings are incredibly slim.

Mortgage rates have been climbing in recent weeks, and the fear is that they'll continue to do so. As such, many buyers will no doubt be eager to scoop up a home this spring. Whether there's enough inventory to support that, however, is yet to be determined.