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Why is the Inventory of Homes So Low?

Ashley Brunner

Ashley was born and raised in the Lancaster area and comes from a family involved with Real Estate...

Ashley was born and raised in the Lancaster area and comes from a family involved with Real Estate...

Jun 5 3 minutes read

The biggest challenge faced by the real estate industry these days is a low supply of homes for buyers. Realtors and buyers alike are lamenting about this inventory issue.  It is a challenge that needs to be tackled to make sure that it does not adversely impact the dynamic housing market.

Most people are clueless as to what the reason behind this poor supply is. First America conducted a survey to find out the possible reasons of low inventory of homes. The survey asked realtors and title agents to enumerate reasons behind lack of homes for sale in the market. This survey revealed some interesting reasons behind poor supply of homes.

  • Nearly half (47%) of existing homeowners were of the view that they will face difficulty in buying a home
  • More than a quarter (26.5%) felt that first time homebuyers gobbled up the available homes in the market
  • More than a tenth (11.3%) said that mortgage rate at present is higher than mortgage rates of existing homeowners
  • A tenth (10.6%) felt low supply is a result of low or negative equity in homes
  • Close to 5% (4.6%) respondents said that high demand from foreign investors was a reason

This survey says that many homeowners are not putting their homes on the market as they are afraid they may not find a new home for themselves. Higher mortgage rates at present also deter these homeowners from putting their homes on sale. It is natural for a homeowner to not be willing to sell his house if it has very little equity in it. He knows that he will have to arrange lots of money to be able to buy another home for his family.

Does this situation offer a window of opportunity?

Keeping in mind the divergent views of the respondent, one thing becomes clear and that is the adverse impact of low inventory on the housing market. It is not just the sellers but also the buyers who are feeling somewhat shackled by this low supply of homes.

What the situation does is to offer an excellent opportunity to homeowners not facing these conditions. They face little competition from other sellers and also benefit from enthusiastic offers from buyers. In fact, they can use this situation to get a high price for their properties.

If you are a home seller, make the most of these conditions if you are not adversely affected.

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