There’s one common question that homebuyers keep circling back to: why am I having such a hard time finding a home? Ultimately, it comes down to the fact that we’re in an extremely competitive seller’s market with a limited amount of homes available. The number of homes on the market doesn’t even come close to the number of house hunters.
While low inventory in the housing market isn’t a new phenomenon, it’s certainly discouraging for potential buyers and a challenge that’s growing over time. The graphs below illustrate the declining supply of single-family homes and condominiums in Long Beach, CA.
Single-Family Homes in Long Beach
Condominiums in Long Beach
So, exactly what’s causing the current housing supply crisis? Here are two key reasons why inventory is still so low, and what this means for you as a homebuyer.
1. New Home Construction Fell Behind for Several Years
In the graph below, you can see the new home construction for single-family homes over the past five years. During the housing bubble in 2005 builders exceeded the long-term average of housing units, which resulted in an oversupply of homes and declining home values. The oversupply of homes was one of the factors that led to the housing crash in 2008.
Since then, new home construction still hasn’t gotten back on track. For the last 13 years, builders haven’t been able to construct enough homes to meet the historical average, which left us with a multi-year inventory deficit going into the pandemic.
2. How the Pandemic Affected the Housing Market
When the pandemic hit in 2020 and the world issued stay at home orders, it fueled a renewed appreciation and focus on the meaning of home. Those who didn’t own homes began looking for more square footage to accommodate the new lifestyle that the pandemic induced. As soon as mortgage rates dropped at or below 3%, those homeowners waiting in the sidelines eagerly entered the market ready to capitalize on the low rates. But, simultaneously, home seller’s were reluctant to put their homes on the market with no clear sight of what the future held.
Here’s what this means for homebuyers:
Dear homebuyers, dealing with low inventory can be challenging and disheartening, but we have some good news for you! Experts predict that more homes will soon be available as seller’s start to re-enter the market.
Danielle Hale, Chief Economist at realtor.com says, “We expect that we’ll start to see a turnaround and inventory will stabilize and start to go up a little bit in 2022. . . . But that means we’re looking at inventory levels of roughly half of what we saw before the pandemic. For buyers, the market is likely to continue to move fast. If you see a home you like, you want to jump on it right away.”
So, instead of putting your home buying plans on hold, remember your goals and why finding a home is important to you. Finding a home takes patience, focus, and of course it helps if you have an experienced real estate agent by your side. If you’d like to connect to discuss your home needs, neighborhood preferences, and budget, click here to schedule a free 15-minute, 30-minute, or 60-minute consultation.