by Maurie Backman | Published on June 25, 2021
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More homes hit the real estate market last month. That could be a good sign for prospective buyers.
There's a reason so many buyers have struggled to buy a home this year. Housing inventory has been extremely limited, and the few homes that have been up for sale have also been the subject of much competition. As such, buyers have been frequently getting outbid on homes they otherwise would've been in a strong position to buy.
But things may be improving in that regard. In May, housing inventory rose 3.9% compared to April, according to Zillow. That represents the first monthly increase since July of 2020. What's more, inventory was up in May, compared to April, in 43 of the country's largest markets.
At the same time, housing inventory is still down 31.2% from the previous May on a national level. And if new listings don't pick up this summer, a lot of buyers may be forced to put their homeownership plans on hold.
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Low mortgage rates have created a surge in buyer demand, but even with May's uptick in listings, there still aren't enough homes for purchase to meet demand. That's causing buyers to duke it out over properties, land in bidding wars, and drive home prices higher.
Normally, housing inventory peaks during the spring, and that may have indeed happened in May, albeit at a very modest level. But if inventory doesn't increase this summer, then unfortunately, 2021 may end up being a wash for prospective buyers on a limited budget.
Though many people won't shy away from listing a home during the fall, once the winter months hit, selling becomes a tougher prospect. Not only can weather interrupt scheduled open houses and showings, but often, homes don't show as nicely in the winter -- at least not in areas that tend to see harsh conditions. After all, if one of a home's key selling points is its park-like backyard with a swimming pool, it's hard to highlight that feature when the ground's covered in snow and the pool has to be covered up.
As such, while housing inventory could still pick up over the next few months even more so than it did in May, that might not happen. And if so, buyers who are frustrated with today's market may want to make the decision to sit tight until the spring of 2022 and resume their home searches then.
At that point, between progress on the coronavirus front and an economy that could be in better shape than it is today, there will hopefully be a lot more inventory to choose from, and more inventory could easily lead to lower home prices. Plus, mortgage rates are likely to stay low for quite some time, so buying in 2022 won't necessarily mean getting stuck with a higher interest rate on a home loan.
The fact that the number of homes for sale rose in May is encouraging. But we're still looking at a major shortage of homes to buy. And until more listings hit, prospective buyers may continue to spin their wheels.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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