Housing Inventory Is Finally Increasing, and Buyers Can Benefit in More Ways Than One

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  • April's housing inventory level showed a smaller annual decline than in previous months.
  • Active listings are still down 67% from pre-pandemic numbers.

Finally, there's some good news for prospective home buyers.

There's a reason home buyers have struggled so much to break into the housing market lately. Not only are home prices up on a national level, but housing inventory has been extremely sluggish.

But recent data points to a positive change in that regard. In fact, Realtor.com says the supply of available homes could increase in the next few weeks based on what it's seeing.

To be clear, housing inventory is still very much down across the board. Compared to pre-pandemic levels, there are 67% fewer homes available for buyers to purchase.

But April's housing inventory level showed a smaller year-over-year decline than in previous months. Last month, inventory was down 12% on an annual basis. That's actually the smallest decline since the end of 2019. And during the last week of April, housing inventory was only down 3% on a year-over-year basis.

Good news for home buyers

An uptick in housing inventory could spell relief for buyers in a couple of ways. First, the more housing supply there is, the less of a disconnect there will be with regard to demand. And bridging that supply-demand gap could be just the thing to send home prices downward.

In fact, a big reason sellers are commanding such high prices for their homes these days is that many properties are landing in bidding wars due to a lack of inventory. If bidding wars become less common, that alone should send property values down toward more moderate levels.

Plus, an uptick in housing supply could mean getting more choices and having to make fewer compromises. There's been a notable lack of starter homes on the market, for example, since the pandemic got underway. That's been putting first-time home buyers in a particularly tough spot, leaving many to stretch their budgets or settle for homes in need of work. If inventory picks up, not only might first-time buyers have an easier time finding homes, but buyers looking to upsize may have an easier time finding properties that check off the right boxes.

A slow and steady increase

Spring is typically when home listings pick up in a meaningful way, so it wouldn't be surprising to see that happen this year. Of course, buyers shouldn't get too excited about an uptick in housing inventory just yet. But in the coming weeks, the number of available homes to buy could rise to a notable degree.

That probably won't lead to an instant drop in property values. But if that trend continues, home prices could eventually start falling.

Right now, home prices are up about 34% since the start of the pandemic. And the average monthly mortgage payment on a $400,000 home with a 20% down payment is now $467 more than it was back in March 2020, Realtor.com reports.

With inflation driving living costs up across the board, buyers can only afford to spend so much on a home. And an uptick in inventory could make it so home prices gradually creep down toward more affordable levels.

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