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Understanding the Low Inventory Housing Shortage

Understanding the Low Inventory Housing Shortage 


The housing shortage is not news to anyone who has looked into buying a new home recently.  According to the National Association of Realtors, the supply of homes for sale in the U.S. has recorded a low of just 1.6 months of supply in January 2022.  While the number has grown since, the supply is still not enough to meet the higher demand.  Here is what to know about the housing shortage, what factors have caused it and how it impacts the overall estate market.  

Why is There a Housing Shortage?

Rising material costs, supply chain issues and labor shortages due to COVID have all negatively impacted the housing inventory.  However, the problem existed long before the pandemic started.  Essentially, the U.S. has failed to keep up with the housing demands of a continually increasing population.  

One factor that exacerbates the shortage is the prevalence of institutional investors, who continue to buy up a large portion of housing inventory for profit.  These investors accounted for more than 13% of all residential real estate purchases in 2021. Removing those units from the pool of availability for individual buyers.

  The current interest rate environment is also complicating matters.  Hopeful buyers have seen their purchasing power plummet as mortgage rates increase.  In addition, high mortgage rates are deterring homeowners from selling, for fear of giving up their locked-in low rates.  Many who might otherwise be sellers are simply choosing to stay put, which is further limiting available for sale existing homes in today’s market.  

What is a Normal Amount of Inventory?

Traditional wisdom states that the real estate market needs a5 to 6 months of housing supply to be balanced or not leaning towards either a buyers market or sellers market.  The NAR home-sales data showed a 3.3 month housing supply in October 2022, which is healthier than January’s record low of 1.6 months but still well below the balance level.  

How Low Inventory Affects Homebuyers and Sellers 

The truth of the matter is that low inventory is affecting both buyers and sellers.  Many would-be sellers are unable to list their homes because they can not afford the price.  It leaves buyers with little buying power and fewer protections in the translation, as sellers have their choice of other hopefuls who might be willing to waive contingencies and accept any terms the seller wants.  

Even though there is a low inventory and harsher market conditions for both buyers and sellers does not mean that your ideal home is not out there.  Whether you are selling or buying, having support of a professional real estate agent by your side can make navigating the real estate market that much easier.  Buyers in Massachusetts are in luck with agents such as Hans Brings that have experience navigating the local markets surrounding Waltham real estate for decades!

Contact Hans for Your Real Estate Needs!

If you are a resident of Massachusetts that lives in the surrounding area near Waltham Hans is here to help you navigate the current real estate market.  Hans is a certified Waltham real estate agent with ample amounts of experience and knowledge when it comes to both buying and selling real estate!  Get in direct contact with Hans by calling him at 781-891-9993 or by filling out a contact form on the website!

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