The theories behind our currently low housing inventory are widespread. The answer depends on what’s going on in each local market, and even then, it may not be crystal clear. Let’s take a look at different parts of the whole since a number of factors are probably working together.

“Where will I go?” worries. Faced with fewer choices and a lot of buyer competition, some families who truly want to sell are worried they will not find a satisfactory home to move into. Rather than risk selling with no place to go, they stay put.

Landlords-a-plenty. Investors bought up a lot of property over the past decade when foreclosures were in abundance. They had a whole new population of consumers who could no longer afford a mortgage. Today, even though more can afford a mortgage, landlords are enjoying increased rental rates and don’t have a good reason to sell their properties, which include many single family homes.

Baby boomers are staying where they are. Typically condos and single-family homes offered by this population would serve as a strong force for inventory, especially for the first-time home buyer. Some say the boomers’ choice to hold on to their homes is creating a big clog in the market. Yet there are still the typical boomers who want to downsize but face the same competition and fewer options as millennials trying to enter the market.

Trade up homes are less affordable. Many families want to move up to a more expensive home, but price increases puts their next level of home out of reach.

Not enough new construction. More new construction homes at the level of affordability for a particular market creates more inventory. Many families looking to trade up want new construction. And when those families plan to move, their current homes become available for the rest of the market. A lack of new construction slows down the selling cycle.

Which Factors Are Making the Most Impact?

A 2017 study done by Trulia indicates that new construction and high investor ownership are the two reasons that impact inventory the most. The study showed that every one-percentage-point increase in a market’s homebuilding is correlated with an average increase of 13 percentage points in overall inventory. And every one-percentage-point increase in a market’s inventory owned by investors created an average decrease in overall inventory by 2.8 percent. All other reasons were statistically lower.

What Are Some Solutions for Buyers?

Many families are choosing to enter the market because the desire or need to move is strong enough to compete with other buyers. For those who are concerned about selling and having no where to go, ask your Realtor® to refer you to lenders who may have options such as blanket loans, where you might qualify for a loan to buy before you sell your current home. Or look into home equity options that allows buyers finance their next home with the equity in their current home. Also, use an experienced Realtor®. He or she can network with other agents to get first-hand information before homes hit the market to ensure you have a leg up on the competition.

Platinum Service Realty