Report: Housing Market Inventory Could Increase in 2021 – 2022

Key highlights from this report:

• Housing market inventory is expected to increase later in 2021.
• In fact, we’re seeing some early signs of this already.
• Home buyers could have more options later this year, and in 2022.
• We need inventory growth in order to cool an overheated housing market.

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For many months now, the message to home buyers across the U.S. has been the same. “Good luck finding a house to buy.” Chronically low housing supply has frustrated buyers, fueled bidding wars, and led to record home-price growth.

But there might be some much-needed relief on the horizon. According to recent and numerous reports, U.S. housing market inventory levels are expected to increase during the latter half of 2021. Home buyers who purchase later this year, or in 2022, could have an easier time finding a suitable property.

Will Housing Market Inventory Increase in 2021?

Last month, the real estate research team at Zillow published data that points to a possible easing of the housing market inventory crunch. Granted, it could take months or possibly years to get back to something resembling a “normal” inventory situation. But it’s good to see things moving in the right direction for once.

According to the April 2021 Zillow report:

“…signs are emerging that the nation’s ongoing inventory squeeze may be starting to ease somewhat, just in time for the start of the traditionally busy spring home shopping season.”

From February to March of this year, the total number of homes for sale in the U.S. declined by just 1.1%. That was a much smaller decline from previous months. And in 19 of the nation’s largest housing markets, for-sale inventory actually rose from February to March.

The company also reported that new inventory (i.e., homes listed for sale recently) rose by 30% from late February to late March of 2021. So hang in there, home buyers. It’s getting better.

Zillow also surveyed a group of more than 100 real estate analysts and economists about current conditions. More than two-thirds (69%) of the panelists said they expect U.S. housing market inventory to start increasing in the second half of 2021 or the first part of 2022.

To quote that report: “An increase in existing homes being listed for sale is expected to be the biggest factor in the reversal.” This echoes other reports and statistics we’ve seen recently, which suggest that homeowners are now increasingly willing to list their homes.

A similar report from Realtor.com showed a sizable increase in the number of newly listed homes. By their estimation, new real estate listings nationwide increased by more than 32% in April 2021 compared to last year. This has provided some relief for frustrated home buyers. New listings rose the most, year over year, in metro areas like Pittsburgh (229%), Buffalo (178%), Detroit (178%), and Philadelphia (140%).

Supply Levels Are Still Very Low in Some Markets

If housing market inventory increases later this year or in early 2022, as expected, it won’t happen evenly. Some of the hottest real estate markets could continue to have supply shortages for the foreseeable future.

Some real estate markets are currently experiencing a surge in demand from home buyers. As a result, inventory levels have fallen to record-low levels. Those areas could take longer to “rebound,” from a supply standpoint.

Boise, Denver, Sacramento and Seattle fall into this category. In these and other red-hot housing markets, inventory levels have sunk to unprecedented lows over the past 12 to 18 months. Sellers have the upper hand in these cities, and that probably won’t change anytime soon.

But at this point, any increase in housing market inventory would be cause for celebration. The lopsided supply-and-demand situation we’re currently experiencing has created a slew of problems, including affordability issues and housing shortages.

George Ratiu, senior economist for Realtor.com, recently called the U.S. housing market “beyond crazy and frustrating” for home buyers. Low inventory is the main reason for this.

Home Buyers Are Getting Creative

Given the current supply shortage, home buyers in many cities across the U.S. have employed a variety of strategies to edge out the competition.

Many buyers are making offers for more than the asking price, even before any negations have taken place. A recent report from the California Association of Realtors showed that two-thirds of home buyers in that state offered more than the asking price in March 2021. And it’s not just happening in the Golden State. Similar trends have been reported in major cities all across the U.S.

The number of all-cash offers has also increased over the past year or so. Additionally, many home buyers are waiving their inspection contingencies (among other things) in order to make their offers more attractive. All of these trends point to an overheated, hyper-competitive housing market. And it’s the inventory shortage, more than anything else, that’s driving this.

Will “normalcy” ever return to the housing market? Sure. Eventually.

But it will happen in stages, starting in the more balanced markets and eventually reaching the overheated ones like Boise and Austin. The first thing that needs to happen is an increase in housing market inventory, which analysts expect during the second half of 2021 or early 2022.

In the meantime, home buyers will just have to be patient, persistent and creative.