Housing Inventory Is Up Almost 27% From Last Year. Here's Why That's Great News for Buyers

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KEY POINTS

  • A glaring lack of housing inventory drove home prices up over the past year.
  • Now, it looks like inventory is picking up, but there's still not enough supply to meet demand.


Finally, there's some positive news on the real estate market front.

There's a reason so many people have struggled to purchase a home over the past year. The real estate market has lacked inventory in a very big way. That's made bidding wars a mainstay in the housing market, resulting in higher home prices all around.

Plus, when housing inventory is limited, it gives buyers fewer choices. So over the past year, many people have no doubt had to settle for a less-than-ideal home in order to sign a mortgage and take the leap into property ownership.

But things finally seem to be changing in a positive way with regard to housing inventory. And now, buyers may have more options -- and more reasonable home prices -- to look forward to.

Inventory is creeping back up

The inventory of homes available for sale was up 26.6% on an annual basis as of August, according to Realtor.com. And that's a positive thing.

When housing inventory increases, buyers are no longer forced to duke it out over the same limited number of properties. That means buyers get more bargaining power -- and they tend to get away with paying less for the homes they make offers on.

But while rising real estate inventory is a good thing for buyers, it's not so great for sellers. Those looking to sell a home want as little competition as possible. Now, sellers may have less leeway to command sky-high prices for their homes. They may also have to make more concessions to draw in buyers.

For example, over the past year, many buyers were willing to waive a home inspection in the course of purchasing a home (a risky move, but a tactic that was employed a lot nonetheless). That meant sellers didn't have to worry about costly issues they'd have to fix before completing a sale.

Now, with housing inventory on the rise, buyers may be less willing to forgo a home inspection. And that means sellers could face various hassles in the course of finalizing deals, such as having to make last-minute repairs they weren't planning on or having to offer sellers discounts to fix such issues themselves. Sellers today may also have to work around buyers' preferred closing time lines, whereas earlier this year, buyers were largely having to work around sellers' schedules.

There's still not enough supply to meet demand

While rising housing inventory is encouraging, the reality is that the current demand for homes still exceeds the availability of supply. That means sellers don't have to panic just yet, because there's still ample opportunity to capitalize on buyer demand.

But those who are serious about listing a home should get moving sooner rather than later. If real estate inventory continues to rise, sellers are apt to lose their edge. And while it's hard to predict when housing supply will increase enough to fully meet buyer demand, there's reason to believe it could happen by the end of 2022 or during the early part of 2023. That gives sellers a little time -- but not much -- to capitalize on the advantage they still have.

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