What Inventory Means For Homebuyers And Sellers
The real estate market is like any market insofar as it operates according to the forces of supply and demand. The demand side of this equation has been a known quantity for the past year. Mortgage prices have continued to reach new historic lows and then have hovered in and around those lows. As a result, millions of Americans have rushed out to buy a new home. The supply side of the equation has been the one thing that is throwing a wrench in the system. Housing inventory is also at record lows, which means there simply are not enough houses to meet the huge demand. While it is clear that large demand fueled by low mortgage prices is good for homebuyers and sellers, low supply is a mixed bag. The team at Streamline Realty is here to talk about how low inventory impacts homebuyers and sellers differently.
Current Housing Inventory Numbers
The inventory for the number of houses available on the real estate market is staggering. According to Realtor.com, the year-over-year change in housing inventory has been a reduction in available homes by 52%. That means that from 2020 to 2021, the number of homes available to purchase has decreased by over half. Keep in mind that this is an average across the United States. In some places like New York, the housing inventory only decreased by about 12.6%. However, in states like Utah, the housing inventory decreased by 68.1%. In Massachusetts, we have seen a decline in available homes to purchase by 48.3%. Those are significant reductions and affect homebuyers and home sellers differently.
Impact of Low Housing Inventory on Home Sellers
For anyone who wants to sell their home, today’s low housing inventory numbers are fantastic. The high demand from people wanting to buy a home, matched with a small supply is a recipe for home prices to skyrocket. And, that’s exactly what has happened. Home prices have increased nearly 12% from last year. To put that in context, a house that was selling for $300,000 at this time last year is now selling for $36,000 more. That is no small chunk of change. Home sellers are asking more for their homes and they are getting it.
Aside from being able to list their homes at higher prices, home sellers are benefiting from low inventory because they are receiving multiple offers on their homes. Many home sellers are finding that homebuyers are entering into bidding wars to buy their property once it is listed. This is especially true in Massachusetts. There are some obvious benefits to receiving a bunch of offers for your house when listing it for sale. First, the price you sell your home at increases when there is a bidding war. Second, it means that your home is usually on the market for less time. Homes are selling quicker than ever, which is great for home sellers. You do not have to tie your finances up for extended periods of time, nor do you have to be stuck in housing limbo.
Finally, the low housing inventory makes selling your home much more convenient. Homebuyers recognize that they are in competition with other homebuyers, which means many are willing to do extraordinary things to win their bids. For instance, more homebuyers are willing to buy houses sight unseen. A lot more homebuyers are also willing to waive contingencies, which means skipping things like home inspections. Also, those homebuyers with the available savings are also making cash offers for houses. All of these different tactics that homebuyers are using to compete with each other make the home selling process much easier. Basically, home sellers are the real winners of today’s low housing inventory. Home sellers are able to ask more for their homes, usually get more than their asking price, and the process is easier than ever.
Impact of Low Inventory on Homebuyers
All of the benefits of low inventory for home sellers are a double-edged sword for homebuyers. If home sellers are able to ask for more money for their home, then homebuyers have to pay more money for any house they want to buy. If multiple buyers are interested in the same property, then each buyer has to find ways of standing out from amongst the other buyers. Basically, we are in the textbook definition of a sellers market, which means that home sellers have all of the leverage.
On the surface, it might seem like there is nothing but bad news for potential homebuyers. However, there are some tremendous benefits for those who make the transition from homebuyer to home owner. The same forces that are increasing the price of the house during the transaction are the same forces that are increasing your home’s value after the sale. Low inventory and higher prices equate to higher values. This is fantastic for homeowners. Home equity has increased dramatically for homeowners over the course of the past year. On average, home equity has increased about $23,000 per home since last year. Homebuyers should be rejoicing at these numbers. Typically, you have to pay down your mortgage for a long time to see your equity rise by these amounts. However, the competing forces of supply and demand are doing it for you.
Final Thoughts
Today’s low housing inventory makes the situation more difficult for homebuyers than it does home sellers. However, it also means that there is tremendous value for homebuyers to overcome these obstacles and become homeowners. Whether you are a homebuyer or a homeseller, one thing is clear, you need a professional realtor who can adapt to the unique demands of today’s market. Home sellers need someone who can make an accurate assessment of home prices and who can take advantage of today’s high demand. Sellers should be striving to get more than their asking price and need realtors who can use the leverage they have. Homebuyers need a realtor who can craft the perfect offer and can present them with a number of options. Homebuyers need a realtor with tenacity and creativity, to help them not only persist, but set themselves apart from their competitors.
If you are thinking of buying a home or selling a home and would like to speak to professional realtors who know the Massachusetts housing market, contact us. We will be happy to talk to you about what you can expect when buying the home of your dreams or cashing out on the home you currently own. Low housing inventory offers opportunities for home sellers and buyers. Find yourself a realtor who can help you take advantage of those opportunities.
