Low Inventory, High Demand = Sellers Market

Low Inventory, High Demand, and the Seller’s Market

1. Supply and Demand Basics:

   • At the heart of the housing market lies the fundamental principle of supply and demand. Imagine a seesaw: on one side, we have the supply of homes available for sale; on the other side, we have the demand from potential buyers.
   • When supply (inventory) falls significantly short of demand, prices soar. It’s like a concert where there are more fans than available tickets—the frenzy begins.

2. The Housing Shortage:

   • Between 2012 and 2022, the United States witnessed the formation of 6.5 million more households than the number of single-family homes built. That’s a staggering housing deficit.
   • The U.S. Government Accountability Office (GAO) points out that shortages of affordable housing have been a persistent challenge. Contributing factors include high interest rates, low inventory, and the growing number of millennials seeking larger homes for their families.

3. The Great Recession’s Impact:

   • The Great Recession (December 2007 to June 2009) hit home construction hard. We saw a slump in construction to a 35-year low.
   • Even now, we’re far from recovering to pre-recession levels. The recession’s aftermath disrupted the usual flow of new housing supply.

4. Mortgage Rates and Staying Put:

   • In 2020, mortgage rates were historically low—somewhere in the high 2% to low 3% range. But since then, they’ve more than doubled.
   • Homeowners who locked in those low rates are understandably reluctant to move. If they did, their mortgage rates and monthly payments would skyrocket.
   • As a result, the usual churn of people upsizing, downsizing, and relocating has slowed, further limiting available homes for sale.

5. Bidding Wars and Equilibrium Price:

   • When supply is low (low inventory), prices rise. Bidding wars erupt as multiple buyers compete for the limited homes available.
   • The law of supply and demand dictates the equilibrium price. In this case, the scarcity of homes pushes prices to unaffordable levels, exacerbating the housing shortage.

Strategies for Sellers in a Seller’s Market

1. Price Competitively:

   • Set a realistic and competitive price. Buyers will scramble to catch the melody of your listing.
   • Your home becomes the hottest tune in town, attracting attention and offers.

2. Stage and Present Attractively:

   • Treat your home like a Broadway show. Professional staging, flattering lighting, and a touch of magic can make it shine.
   • Cue the applause from potential buyers!

3. Be Prepared to Move Quickly:

   • When that acceptable offer arrives, take center stage. Capitalize on the favorable market conditions.
   • Don’t miss your cue—timeliness matters.

Challenges and Considerations

1. Finding a New Home:

   • While selling is advantageous, the hunt for your next home can feel like chasing a unicorn.
   • Patience and persistence are your allies in this competitive environment.

2. Coordinating the Sale and Purchase:

   • Avoid the housing limbo dance. Coordinate selling your current home with buying the next one.
   • Juggling two mortgages or crashing at Aunt Mildred’s spare room isn’t ideal.

Subsequently, sellers, take a bow! The spotlight is yours in this seller’s market.  If you need more real estate advice or have any other questions, feel free to ask—I’m here to help!