Here are three reasons why the market has a shortage of homes.

Why is housing inventory so low? This question has been top of mind for many consumers, and although it can be frustrating and tempting to sit on the sidelines and wait for this problem to work itself out, that may not be the best strategy. This has been a problem created over years, and today, we're going to talk about the short-term and long-term factors that have contributed to our current low inventory situation.

One of the first and biggest factors contributing to our low inventory situation is that underbuilding has been a problem for decades now. The graph at 0:40 shows the construction of single-family homes over the past five decades, including the long-term average for housing units completed for 14 straight years.

Builders didn't construct enough homes to meet the historical average in red. This created a significant inventory deficit. Even though new construction is back on track, unfortunately, this problem is not going to be solved overnight.

The next factor is what I call the lock-in effect. We all know that rates have doubled in a year, which is unprecedented. Unfortunately, that rate increase has created a lot of reluctant sellers unwilling to part with their incredibly low mortgage rate. The following graph at 1:23 in the video shows that a little over 70% of mortgage rates are less than 4%, and these sellers don't want to give up that rate for what could likely double if they were to make a move.

“The low inventory and current demand situation is still supporting very strong pricing.”

The third and final factor contributing to low inventory has been in the headlines. We've talked about this in previous videos where economists and housing experts were predicting a market crash that never came, that frankly, never made any sense, given the low inventory situation and high demand that we were seeing. But they were expecting and predicting 20% to 10% declines in market value.

That put a lot of people on the sidelines, sellers and buyers, and it froze up the market, which also limited our supply. If you're wondering how this impacts you, a lot of that depends on whether or not you're selling, buying, or both. The reality is if you're a buyer, you might need to be flexible either on your housing type or the area that you're looking in.

You also need to make sure you partner with an agent who has a strategy to help you find properties that may not be on the market, and they should have a plan for that. If you're a seller, the reality is we've definitely come off the peak of the pandemic and incredibly high prices. However, that being said, the low inventory and current demand situation is still supporting very strong pricing. You're in an excellent position right now because you have very little competition.

When you're selling your house, you are in a race to compete with other homes. Your goal is to sell before they do, and you have far less competition out there. So, if you're looking to make a move, call or email me. I'd love to help you put a strategy together that enables you to win in today's market.