How Low Inventory May Impact the Housing Market This Fall

How Low Inventory May Impact the Housing Market This Fall

Real estate continues to be called the ‘bright spot' in the current economy, but there's one thing that may hold the housing market back from achieving its full potential this year:the lack of homes for sale. Buyers are actively searching for and purchasing homes, looking to capitalize on today's historically low interest rates, but there just aren't enough houses for sale to meet that growing need. Sam Khater,Chief EconomistatFreddie Mac,explains: Mortgage rates have hit another record lowdue to a late summer slowdown in the economic recovery…These low rates have ignited robust purchase demand activity…However, heading into the fall it will be difficult to sustain the growth momentum in purchases because thelack of supply is already exhibiting a constraint on sales activity. According to theNational Association of Realtors(NAR), right now, unsold inventory sits at a 3.1-monthsupplyat the current sales pace. To have a balanced market where there are enough homes for sale to meet buyer demand, the market needs inventory for 6 months. Today, we're nowhere near where that number needs to be. If the trend continues, it will get even harder to find homes to purchase this fall, and that may slow down potential buyers. The overall lack of sustained new listings growth could put a dent in fall home sales despite high interest from home shoppers, becausenew listings are key to home sales. The Weekly Recovery Reportkeeps an eye on the number of listings coming into the market(houses available for sale)and the total number of listings staying in the market compared to the previous year(See graph below):Buyers are clearly scooping up homes faster than they're being put up for sale. The number of total listings (the orange line) continues to decline even as new listings (the blue line) are coming to the market. Why? The post-pandemic period has brought arecord number of homebuyers back into the market, but it's also failed to bring a consistent number of sellers back. Homes are selling faster, and sales are still on an upward trend, but rapidly disappearing inventory also means more home shoppers are being priced out. If we don't see material improvement to supply in the next few weeks,we could see the number of transactions begin to dwindle again even as the lineup of buyers continues to grow. Does this mean it's a good time to sell? Yes. If you're thinking about selling your house, this fall is a great time to make it happen. There are plenty ofbuyerslooking for homes to purchase because they want to take advantage of low interest rates. Realtors are also reporting an average of3 offersper house and an increase in bidding wars, meaning the demand is there and the opportunity to sell for the most favorable terms is in your favor as a seller. Bottom Line If you're considering selling your house, this is the perfect time to connect so we can talk about how you can benefit from the market trends in our local area. Please call Debbie Brassel, RE/MAX Alliance Group at 602-309-9990. I will be honored to help you. www.phxhomesforsale.com