Real Estate Questions and Advice

Question:

For some time there have been worries about an inventory shortage. With sales down and fewer buyers in the marketplace, has the inventory situation improved?

Answer: ere is more existing home inventory, meaning buyers have more choices. ere were 980,000 available units, up 5.4% from a year earlier, when the count stood at 930,000. At the same time, existing home sales were down 22%. Prices fell .9% from a year earlier, meaning values were essentially flat, neither falling dramatically nor rising significantly. at said, there just isn’t a lot of inventory. Part of the reason may well be that today’s interest rates look steep to current owners but acceptable to willing buyers.

We have evidence that there’s more inventory balance of late. Let’s look at several statistics from the National Association of Realtors (NAR) for March.

(Interestingly, the month before, in February, the string of 131 consecutive months of year-over-year price increases – the longest streak of housing price increases on record – came to an end.)

In a sense, long-suffering buyers are gaining marketplace leverage. Not enough to significantly force down home values, but enough to gain some negotiating power and even price cuts in selected markets.

“Elevated mortgage rates are perhaps an even bigger deterrent for would-be sellers than for would-be buyers. Giving up a 3% mortgage rate for one in the 6% range is a tough pill to swallow,” said Redfin Deputy Chief Economist Taylor Marr.

“Today’s serious homebuyers,” he added, “have grown accustomed to the idea of a 5% or 6% rate and have adjusted their budgets accordingly. e lack of homes hitting the market explains why the market is moving fast even though sales are still down. e lack of new listings is also one reason why sales are down: Buyers can’t buy if sellers don’t want to sell.”

However, it’s also true that sellers can’t sell if

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By Peter G. Miller

buyers don’t want to buy.

One way to break the cycle is to increase the number of housing units, to have more construction, but March new home sales were down 3.4% when compared with a year earlier.

And -- if affordability is an issue with existing homes -- it’s a bigger issue with new construction. e median cost of an existing home in March was $363,700. at compares with $449,800 – the median price for new homes that month.

To make matters more complex, many of those who would like to be in the real estate market as buyers or sellers are on the sidelines, in part because we are still feeling the effects of the pandemic economy. It’s unclear if we are about to conquer inflation, if we might enter into a recession, or maybe both at the same time. Many are comfortable waiting until the economic signs become clearer before entering the real estate market.