Monday Market Update: Inventory Insights From The NY Times

The talk about low inventory is NOT new, but are the reasons behind it changing, continuing or evolving? This week we are pleased to share some insights from a recent New York Times article titled ‘Where Have All the Houses Gone?’.

“The inventory of homes for sale is startlingly low.

The pandemic is part of the reason, but it’s not the whole story.”

Authors Emily Badger and Quoctrung Bui start off the article with the harsh reality that ‘you’re likely to see only about half as many homes for sale as were available last winter’, citing ‘a record-shattering decline in inventory, following years of steady erosion.’ Inventory lows are not limited to Silicon Valley, and metros across the nation from Austin to Cleveland are experiencing unprecedented home availability declines. Badger and Bui assert that that while ‘historically low interest rates and a pandemic desire for more space are driving demand — the other half is more complicated.’

Wharton Business School Economist Benjamin Keys explains that the many steps along the so-called ‘property ladder’ are impacting the US inventory shortage. He points to the following as obstacles in homes entering the market:

·        Selling in a pandemic is not a desirable move during a pandemic; who wants to open their home to potential buyers (also strangers!) during such a vulnerable time?

·        Baby Boomers have been in hold mode largely due to the reason above and represent the majority of homeowners in America. If they don’t move out – no one else can move in.

·        Life transitions are on hold, fewer family members are comfortable moving their parents and grandparents into assisted living communities and nursing homes (though this may change with vaccine availability).

·        Move-up buyers in starter homes are uncertain what ‘work' will look like in the next 6 months. Until the future of remote work is clearer, where to move is a blur of best guesses.

Ralph McLaughlin, Chief Economist of housing start-up Haus, offers some more perspectives on tightened inventory:

·        McLaughlin cites the self-reinforcing cycle of skittish sellers being afraid to find their next home; he believes that “Every additional home that gets pulled off the market incentivizes someone else to not sell their house.”

Other influencing factors include:

·        Four million homes with government backed loans were in mortgage forbearance during the pandemic (and over 2.5 million still are). Many of these homes would have come on the market through forced sale or foreclosure if not for government policy.

·        New construction has been limited relative to historical averages since the 2008 housing crash. A lack of empty homes means buyers are dependent on others to move. Yet The New York Times states that “the larger story of the pandemic is this: Americans have been staying put.”

Wow! As you can see, the bigger picture behind the inventory shortage is not a simple story of supply and demand. We encourage you to read the entire article to gain even more insight into how low rates are driving individual investors and the purchase of second and vacation homes, as well as how the end of mortgage relief and growth of covid-19 vaccinations may change the trajectory in the seasons to come.

Source: Where Have All the Houses Gone? (The New York Times) 

All my best,

Bobbi Decker
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Broker Associate
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