Housing Inventory Is Creeping Back Up. Here's What Buyers and Sellers Need to Know

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  • There were 1.26 million unsold homes as of the end of June.
  • That represents a 2.4% increase on an annual basis.

It's been a long time coming.

Home buyers have been struggling over the past year and change due to a number of factors, including sky-high home prices and a glaring lack of real estate inventory. Unfortunately, the first issue continues to be a problem in today's housing market, as the National Association of Realtors (NAR) reports June's median home sale price as $416,000 -- a new record high.

But the second issue -- a lack of housing inventory -- may finally be easing. There were 1.26 million unsold homes as of the end of June, according to the NAR. That represents a 2.4% increase from June of 2021 and a 9.6% increase from May.

Of course, an uptick in housing inventory is very good news for buyers. But for sellers, it might raise a red flag, and understandably so.

Buyers stand to benefit

An increase in housing inventory is very good news for buyers, for a couple of reasons. First, any time there's an even match between supply and demand, it can lead to more affordable prices. And so if real estate inventory continues to pick up, it might help drive home prices downward, making mortgages more affordable.

Furthermore, an uptick in inventory makes bidding wars less likely. Bidding wars can be extremely stressful, and they can also result in higher home prices.

Also, the more inventory buyers have to choose from, the more likely they'll be to find homes that meet their needs. Over the past year or so, buyers have had to compromise and settle for homes that may have been smaller or older than they would've liked due to a lack of options. That could change as inventory picks up.

Sellers could lose out

There are drawbacks for sellers here, however. The more homes there are up for sale, the more competition sellers face. And that could lead to lower sale prices across the board.

Plus, over the past year and change, many buyers were willing to waive home inspections in order to get their offers to purchase properties accepted. And not having to go through a home inspection is great for sellers, as that means not having to worry about making last-minute repairs for a sale to go through.

But as housing inventory increases, buyers are apt to be less flexible with regard to waiving inspections. That means sellers could face added costs in the course of closing on home sales.

An expected turn of events

A big reason the housing market was so devoid of homes for the past year and change likely had to do with economic and pandemic-related uncertainty. But at this point, the pandemic is probably playing less of a role in sellers' decisions to list their homes. And while there's ongoing talk of an impending recession, the reality is that an anticipated downturn is likely to drive more property listings in the near term, as sellers will want to get ahead of a broad economic decline.

All told, it's not surprising to see housing inventory finally start to pick up. And while we're not yet at the point of having enough homes to meet buyer demand, we're getting closer. That's a positive turn of events for buyers, but all isn't lost for sellers. Those who list their homes quickly can still capitalize on strong demand and limited competition.

Our Research Expert

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