The Battle for Homes: Inventory Shortage Drives Intense Buyer Competition as Home Prices Reach Near Record Highs
In June, U.S. home prices experienced another surge, approaching near-record levels. While some see these highs as a positive sign of a recovering real estate market, many prominent real estate experts caution that the worsening inventory shortage could deter many prospective homebuyers from entering the market. A recent report from Redfin, a real estate brokerage firm, reveals that median home prices rose by 1.9% in June compared to the previous month, reaching an average of $426,056.
Describing the current state of the housing market, Redfin's chief economist, Daryl Fairweather, characterized it as "extraordinary" and stated, "It feels hot even though there are very few homes changing hands."
Real estate expert and Reports On Housing Author Steven Thomas says, "Open houses are lined with buyers. Bidding wars have returned, along with homes selling above their asking prices. Housing is crazy once again."… "Yet, the actual number of buyers in the marketplace is far fewer than many realize."
How can that be?
Inventory Shortage Pushes Homebuyers Out of the Market
Steven Thomas broke down the situation: "It is as if Disneyland decided to limit attendance to 50% of its average summer ticket sales. Park attendees would expect to walk on just about every ride. But once they enter the 'Happiest Place on Earth,' they quickly find that only half the attractions are open, and the lines are just as long as a typical summer day. That is precisely what is going on in the housing market today."
The low number of available homes on the market has resulted in buyers engaging in fierce bidding wars to secure a home. A recent report from Realtor.com showed that the inventory of available homes in June was more than 47% lower than pre-pandemic levels in early 2020.
According to Fairweather, sellers are receiving multiple offers, despite the relatively low number of active buyers. "Sellers are getting multiple offers if their home is priced well and in a desirable area, even though there aren't a lot of buyers out there," Fairweather said. "That's because house hunters have so few homes to choose from. More buyers are starting to come out of the woodwork as they get used to elevated mortgage rates, which is making the market feel even hotter."
Redfin data also showed that the housing market currently has a mere 1.8 months of housing supply available, representing the lowest supply since the onset of the pandemic. The National Association of Realtors (NAR) highlighted a lack of inventory as the primary factor stopping potential clients from making purchases.
"Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing," said NAR Chief Economist Lawrence Yun, "The lack of housing inventory continues to prevent housing demand from being fully realized."
Steven Thomas told us, "Even though the housing market is hot once again, many buyers have been pushed to the sidelines due to the high mortgage rate environment." As the inventory shortage persists and home prices remain high, the challenges facing homebuyers will persist for the foreseeable future.