Will Low Housing Inventory Continue Into 2024?

There's a reason 2023 has been such a tough year to buy a home. In addition to expensive home prices, buyers have had to deal with a glaring lack of inventory.

As of late September, there was only a 3.4-month supply of available homes on the U.S. real estate market, according to the National Association of Realtors. That's well below the four- to six-month supply that's often needed to meet buyer demand in full.

If you've been struggling to find a home in 2023, you may be wondering if housing inventory is likely to pick up in 2024. And the answer? It'll depend heavily on how expensive it is to sign a mortgage loan.

Borrowing rates are keeping people put

A big reason there aren't a lot of homes on the market is that mortgage rates are sky-high these days. As of late October, the average 30-year mortgage rate was a whopping 7.79%, according to Freddie Mac.

By comparison, just a few years ago, mortgage lenders were offering up 30-year loans at around 3%. During that time, many people rushed to sign purchase mortgages. And existing homeowners rushed to refinance their existing loans.

But because it's gotten so expensive to sign a mortgage, pretty much nobody with a competitive mortgage rate wants to move. And that makes sense. Would you want to trade in a 30-year mortgage at 3% for a new loan at almost 8%? Probably not.

So all told, it'll probably take a pretty big drop in mortgage rates to help housing inventory pick up. And it's not looking likely that mortgage rates will plummet in early 2024.

As the year progresses, they may come down. But unless that happens to a notable degree, real estate inventory is likely to remain stagnant.

How to cope with a low housing inventory

We unfortunately may not see a big uptick in property listings in 2024. But that doesn't mean buying a home won't be possible for you in the new year.

One way to get around the issue of limited inventory is to narrow down your wish list and focus on homes that satisfy your core requirements. If you can find a home that has the space and square footage you need, you can worry less about factors such as whether the kitchen is updated or the basement is finished. Those are projects you can tackle in the future as time and money allow for.

Also, you may want to expand your search geographically. There may be a specific neighborhood you want to get into for its local amenities, like parks and shops. But if there are nearby neighborhoods that give you reasonable access to those same amenities -- say, a six-minute or eight-minute drive -- then it could be worth it to broaden your search parameters.

Finally, put the word out that you're looking for a home to buy, and don't just rely on your real estate agent to find available properties in your area. Tell all of your neighbors and friends to tell their friends that they know a seriously interested buyer. You never know when you might get an opportunity to take a look at a home before it hits the market -- and potentially beat other buyers to the punch.

At this point, real estate inventory will likely remain low at the start of 2024. Things could improve as the year moves along. But it's likely going to take a major drop in mortgage rates to open inventory up in a meaningful way. So until that happens, do your best to be flexible in your search, and don't be shy about putting the word out that you're in the market to buy.