Homes for Sale Are Rapidly Disappearing
Through
all the challenges of 2020, the real estate market has done very well, and purchasers are continuing to take advantage of historically low mortgage rates.
Realtor Magazine just
explained:
“While winter may be typically a slow season in real estate, economists predict it isn’t likely to happen this year…Low inventories combined with high demand due to record-low mortgage rates is sending buyers to the market in a flurry.”
However,
one challenge for the housing industry heading into this winter is the dwindling number of homes available for sale. Lawrence Yun,
Chief Economist for the
National Association of Realtors (NAR), recently
said:
"There is no shortage of hopeful, potential buyers, but inventory is historically low.”
In
addition, Danielle Hale,
Chief Economist for
realtor.com, notes:
“Fewer new sellers coming to market while a greater than usual number of buyers continue to search for a home causes inventory to continue to evaporate.”
One
major indicator the industry uses to measure housing supply is the
months’ supply of inventory. According to
NAR:
“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.”
Historically, six months
of supply is considered a normal real estate market. Going into the pandemic, inventory was already well below this mark. As the year progressed, the supply has was reduced even further. Here is a graph showing this measurement over the last year:
What does this mean if you’re a buyer?
Be patient during your home search. It may take time to find a home you love. Once you do, be ready to move forward
quickly. Get
pre-approved for a mortgage, be prepared to make a competitive offer from the start, and understand how the shortage in inventory has led to more
bidding wars. Calculate just how far you’re willing
to go to secure a home if you truly love it.
What does this mean if you’re a seller?
Realize that, in some ways, you’re in the
driver’s seat. When there’s a shortage of an
item at the same time there’s a strong demand for it, the seller is in a good position to negotiate. Whether it’s the price, moving date, possible repairs, or anything else, you’ll be able to ask for more from a potential purchaser at a time like
this – especially if you have multiple interested buyers. Do not be unreasonable, but understand you probably have the upper hand.
Bottom Line
The housing market will remain
strong throughout the winter and heading into the spring.
Know what that means for you, whether you’re buying, selling, or doing both.
