by Maurie Backman | June 15, 2021
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Buyers keep hoping housing inventory will increase. But what if it doesn't?
Speak with any buyer who's been trying to navigate the real estate market over the past six months or so, and you'll hear the same thing -- there are just no homes to buy.
Well, that may be an exaggeration -- there are some homes out there, but not nearly enough to keep up with buyer demand. Mortgage rates have been holding steady at attractive levels since the start of the year, and a lot of buyers want to capitalize on them. But there just aren't enough homes to go around.
In April, there was only a 1.1-month supply of available homes on the market, according to RE/MAX. But to create a housing market where buyers and sellers are on a level playing field, a four- or five-month supply of homes is needed, which means right now, buyers are at a severe disadvantage. And they're paying the price by, well, paying higher prices for the properties they are able to buy.
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A big reason housing inventory is low, and has been low for many months, likely has to do with the pandemic. In the best of times, welcoming strangers into a home for showings and open houses is awkward. During a pandemic, it can be downright terrifying.
What's more, the pandemic didn't just create a health crisis -- it also did a number on the U.S. economy. And a lot of people probably didn't want to list their homes at a time riddled with so much financial uncertainty.
Right now, it's hard to say when housing inventory will increase. It's apt to happen at some point, but it may not be in 2021.
Normally, a large number of homes hit the market during the spring, but that didn't happen this year. Sellers generally prefer to list their homes when the weather is mild and cooperative, which gives those in many parts of the country just a handful of months to put their properties out there. Once winter hits, listings tend to be relatively sluggish.
Now things have improved with regard to both the pandemic and the economy -- coronavirus cases are down, vaccinations are plentiful, and the jobless rate has been steadily declining. But whether that's enough to sway sellers to list in the near term is yet to be determined.
If you're in the market for a new home but listings don't increase over the next few months, then you may want to consider pausing your home search until 2022. Not only does limited inventory mean having fewer homes to choose from, but it also means having to pay a lot more for a home, since prices are extremely inflated on a national level.
Once more homes hit the market, prices should start to come down. But if inventory doesn't pick up this year, home prices will likely stay inflated to the point where they negate the savings offered by lower mortgage interest rates. And that's why you may need to resign yourself to waiting to buy a home until next year if things don't change soon on the inventory front.
The good news, however, is that mortgage rates are likely to stay low for quite some time, so if you don't end up buying in 2021, don't assume you've missed that boat. There's a good chance rates will still be competitive next year, and if housing inventory increases at the same time, you'll have a solid opportunity to snag a great deal.
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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