by Maurie Backman | April 20, 2021
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Housing inventory has been low all year, which could make for a tricky spring market.
If you're in the market for a new home but have been tripped up by the glaring lack of inventory, you may have spent the past few months telling yourself to hang tight and wait for spring. Spring is generally a popular time for sellers to list homes for a number of reasons -- longer days, better curb appeal, and the promise of summer closings that don't interfere with the school year.
But this year's spring market may not be nearly as robust as most. Right now, the U.S. housing market is 3.8 million homes short of meeting current demand, according to a recent analysis by Freddie Mac. That's a 52% rise in the country's housing shortage compared to 2018, when Freddie Mac started tracking that deficit.
That lack of listings makes for an even more competitive market. When homes are in short supply, demand increases, and so do prices. Home values have soared over the past year, pricing prospective buyers out of neighborhoods that are normally within their financial reach.
A short supply of housing also means buyers may have to compromise on what they really want. Those in the market for starter homes, for example, may have to resign themselves to fixer-uppers that need a lot of work. Those looking for moderately priced homes may not find the layouts or square footage they seek. And even buyers with generous budgets may find they can't get all the features they want in a higher-end home.
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If you hope to buy a home this spring, you may face challenges due to limited inventory. So should you continue to look for a home, or wait?
Earlier in the year, there was reason to hope housing inventory would open up in the spring. But spring has sprung, and alas, inventory hasn't picked up so far.
Much of that may boil down to the ongoing pandemic and general economic uncertainty. Though coronavirus vaccines have rolled out, much of the general population has not yet been inoculated. That could explain why so many would-be sellers are holding off on listing their homes -- they'd rather wait until they're better protected against COVID-19 before welcoming strangers in to look at their homes. Also, though the economy has been improving, the jobless rate remains fairly high. Sellers may hesitate to list their homes with things still far from normal.
As a result, the usual spring influx of homes may be delayed this year, and right now may not be the best time to look for a home. You may find that your search leads to frustration unless you have a fairly flexible home-buying budget and a limited number of items on your wish list.
If you do attempt to buy in today's market, prepare to duke it out with other buyers in bidding wars for the few available properties. To put yourself ahead of the game, get pre-approved for a mortgage. Though pre-approval doesn't guarantee that a mortgage lender will give you a home loan, it shows you're a serious buyer whose finances have already been reviewed -- and that could prompt a seller to accept your offer over another one.
There's no sugarcoating it: It's a tough time to buy a home. If your search has been fruitless thus far, pausing it for a month or two could be a good bet. In the interim, ready your cash reserves for a down payment so that when the market opens up, you're in a position to make strong offers.
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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