Why Low Inventory Is a Win for Sellers

Real estate continues to be called the ‘bright spot’ in the current economy, but there’s one thing that may hold the housing market back from achieving its full potential this year: the lack of homes for sale.

Buyers are actively searching for and purchasing homes, looking to capitalize on today’s historically low interest rates, but there just aren’t enough houses for sale to meet that growing need. Nadia Evangelou, Senior Economist & Director of Forecasting for the National Association of Realtors (NAR), explains:

“These ultra-low mortgage rates make homebuying more attractive, boosting activity to the highest level since 2006...Nevertheless, inventory continues to fall, widening the gap between housing demand and supply.”

According to NAR, right now unsold inventory sits at a 2.5-month supply at the current sales pace. To have a balanced market where there are enough homes for sale to meet buyer demand, the market needs 6 months of inventory. Today, we’re nowhere near that number. If this trend continues, it will get even harder to find homes to purchase, and that may slow down potential buyers. Danielle Hale, Chief Economist for realtor.com, notes:

“While some buyers are frustrated, there are still plenty trying to make a move. This means that homes are still selling fast, and inventory is dropping despite an improving new listings trend.”

The Weekly Recovery Report from realtor.com keeps an eye on the number of listings coming into the market (houses available for sale) and the total number of listings staying in the market compared to the previous year (See graph below):

The number of total listings (the orange line) continues to decline even as new listings (the blue line) are coming to the market. Why? Buyers are scooping up homes faster than they’re being put up for sale. Hale emphasized:

“New listings are a necessary ingredient for further home sales, so additional improvement here will be important for home buyers and sustaining home sales activity.”

Does This Mean It’s a Good Time to Sell?

Yes. If you’re thinking about selling your house, this winter is a great time to make it happen. There are plenty of buyers looking for homes to purchase because they want to take advantage of low interest rates. Realtors are also reporting an average of 3.4 offers per house and an increase in bidding wars, meaning the demand is there and now is the opportune time to sell for the most favorable terms.

Bottom Line

If you’re considering selling your house, this is the perfect time to discuss how you can benefit from the market trends in our local area.