How Is The Market Marvin? Why Is The Inventory Of Homes For Sale So Low?

How is the market Marvin?

Every month, I study market conditons to better understand how to serve my Buyer and Seller Clients. What I have noticed over the past 5 years is a 60 consecutive month year over year decline in inventory of homes for sale. See the following graph to see the decline of inverntory from January 2014 through July 2020. You will notice this is not a linear regression, but a lowering of the year over year cycle of available homes for sale.

There is no quick and easy answer to the question, "Why is the current inventory of homes for sale so low? The following market forces are combining to keep inventory levels low. 

  1. The new home builder was out of business, or doing very little business, from 2008 to 2014 due to the crash of 2007-2008. This left the real estate market without the normal infulx of new homes coming to market for 5 or 6 years. 
  2. Baby Boomers are choosing to "Age In Place". Many boomers have been in their homes for 20-40 years and do not want to move. I have seen older clients convert their living room and/or dining room into a downstairs master suite so they no longer have to go upstairs. Aging in place is keeping these homes  off the resale market. 
  3. People, in general, are staying in their existing homes longer. See attached graph "Average length of time home owners are staying in their homes". Before the crash of 2007-2008, the average length of time a homeonwer stayed in their home was around 6 years. The average is now up to about 10 years. 
  4. Interest rates have been at historic low levels for the past 4 years. Low interest rates are pushing buyers into the market in record numbers. People who lost their homes between 2008 and 2012 are feeling safe to return back into the home buying market.  Millenials, who are typically first time home buyers, in the past 2-3 years have made up the largest segment of the buying population.  These market factors of low rates and high demand are putting huge amounts of pressure on the low inventory of resale homes on the market.

I am fond of saying, "If the home is priced right, parade ready, and in a good location, it will fly off the shelf". Markets are micro, however, a broad brush statement about the market would be "It is a seller's market right now". Inventory is low and demand is high. Basic economic theory of supply and demand explains why the Seller is in control. 

6 Year Inventory Graph

Average length of time home owners are staying in their home

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