The U.S. Housing Market Is Short More Than 5 Million Homes

Though housing inventory has picked up recently, there's still not nearly enough to meet buyer demand.

There's a reason why so many buyers have struggled to purchase a home in 2021. The U.S. housing market has experienced a huge decline in inventory, and it's caused home values to soar.

Right now, the U.S. residential housing market needs 5.24 million more homes in order to meet buyer demand, according to a new report from Realtor.com. And there are a number of reasons why.

The pandemic affected the housing market

For one thing, residential construction was halted early on in the pandemic, and now, labor and materials shortages are making it difficult to play catch-up. Furthermore, a lot of people have held off on listing their homes during the pandemic due to the general economic uncertainty that's abounded since early last year.

But now, people who are looking to buy a home are in an unquestionably tough spot. Not only must buyers grapple with sky-high prices, but they're also more likely to have to deal with bidding wars given the lack of inventory available today.

If you've been trying to buy a home but have had a difficult time thus far, you may be wondering if it pays to give your house hunting a rest. The answer? It just might.

Why it pays to wait to buy

U.S. housing prices rose 17.4% during the second quarter of 2021 compared to the second quarter of 2020, according to the Federal Housing Finance Agency. And a big reason boils down to low inventory. If you put your house hunting on hold and wait for more properties to hit the real estate market, you may find that prices start to come down.

Right now, mortgage rates are sitting at very attractive levels. But they may not be low enough to compensate for such a major uptick in home prices. Plus, buying a home now may mean more than just paying a premium for it and taking on a higher mortgage as a result. It could also mean having to compromise to an unhealthy degree.

It's one thing to settle for a three-bedroom house if a four-bedroom in your target neighborhood just isn't available, or to buy a home with an outdated kitchen and update it after you move in. But it's another thing to have to settle for a home that's way too small for your family or that forces you to move to a neighborhood that isn't ideal for you. So if you wait for housing inventory to open up, you may not have to do any of those things.

Of course, we don't know exactly when more homes will hit the market. But ideally, as the economy continues to improve and supply chain issues start to resolve, we'll see more sellers list their homes and an uptick in new construction.

Come this time next year, the housing market could end up looking very different. At the same time, mortgage rates are likely to stay low for quite some time. So waiting things out won't necessarily mean paying more to finance a home of your own.