Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Housing Inventory Trends Upwards

Written by Than Merrill

Housing inventory, or lack there of, has continued to restrict the growth of our economic status as a whole. The distinct lack of available properties has served as a catalyst for bidding wars and increased prices amongst prospective buyers. The influx of potential owners greatly outnumber available inventory levels, preventing many from buying a home and stimulating our economy.

However, recent trends suggest that inventory levels are being restored. A recent report by Redfin has acknowledged that active listings grew 6.4 percent between March and April. The subsequent transition into May witnessed an additional 4.2 percent increase in available inventory supplies.

This time last year, housing inventory levels were mired in a downward spiral, as they reached their pinnacle in January. New listings were also down nearly a third from 2012’s already weak levels. However, new listings have since exploded on to the scene. The report by Redfin serves as an encouraging sign that we may see a positive increase in year-over-year inventory levels.

“Lots of homeowners want to sell,” said Redfin CEO Glenn Kelman. “And lots of people want to buy. The problem has just been agreeing on a price. Over the last 12 months, Redfin agents have talked to plenty of homeowners seeking to test the market at a very aggressive price, just so a sale would yield enough money to pay off the mortgage. Those consultations often ended with a decision to wait. What has changed in the last 60 days is that these owners are now listing, selling — and even appraising — at the price they’ve needed to get all along. People who bought near the peak in 2006 and 2007 — only to get buried in the downturn under a mountain of debt — can now, for the first time in years, see daylight. And they’re running for it.”

The recent lack of housing inventory has served to drive up prices, giving homeowners a sufficient amount of equity to sell. Furthermore, sellers with established equity are being lured into the market after seeing their neighbor’s homes sell in record time as a result of fierce bidding wars. Such an environment has served to facilitate the creation of more inventory. According to a Redfin inventory forecast, positive trends will continue throughout the year.

“I have several clients who are ready to take the plunge and list their homes—they’ve even de-cluttered and we have the listing ready to hit the MLS,” explained Redfin listing specialist Paul Stone. “The sellers are just waiting to get under contract on a home to buy, at which point we’ll pull the trigger and list their current home.”

Phoenix is at the forefront of the current trend, as the Arizona city has already seen a 14 percent year-over-year increase in May. However, some geographical regions have not been so lucky. Los Angeles, California’s Inland Empire, and Boston have each fallen over 40 percent from a year ago.

Despite the recent increase in inventory, we still have a long road ahead of us until we can consider ourselves within the boundaries of a “normal” market. The resulting housing inventory increase does, however, serve as an encouraging sign for buyers, as the available selection will continue to increase. Larger inventories will drive sales and stimulate the economy.