Finding a Home in a Low-Inventory Market
Fast Fact: 58% of all home buyers say low inventory has been their biggest obstacle, with one-third spending more than a year shopping for a home. But that may be about to change.
Does it seem like you’re never going to find a home to buy? You’re not alone. More than half of potential buyers report big problems finding a home because of too much competition in a low-inventory market.
But don’t give up just yet.
Remember back when the real estate bubble burst? No one knew exactly how far home prices would drop, so no one wanted to buy the millions of existing homes accumulating for sale. Banks stopped lending money to build, and builders put the brakes on new construction.
Eventually home prices dropped low enough to motivate investors who began buying homes to either flip or hold as rental properties. That was good news because banks and other sellers liked the clean, quick cash deals. In fact, investors helped jump-start the housing recovery, saving our home values from falling even further.
Back in 2010, the National Association of REALTORS® was working closely with members of Congress to pass bipartisan legislation—the Dodd-Frank Wall Street Reform and Consumer Protection Act—to rein in risky boom-era credit practices and establish sound lending and mortgage underwriting standards to protect consumers and their tax dollars.
Four years later, on October 21, 2014, regulators announced a final rule on one of the larger provisions mandated by the Dodd-Frank Act: a definition of qualified residential mortgages, which NAR strongly supports.
NAR believes ongoing tight credit restrictions are hampering a full market recovery and leaving potential home buyers on the sidelines, especially first-time buyers.
First-time buyers have the toughest time, because they usually have less cash saved for a down payment and need to jump through more hoops to get a loan.
FACT: First-time home buyers account for only 33% of all sales today, down from 40% before the recession.
Those who do manage to find a home often have to make uncomfortable compromises to close the deal, such as agreeing to an “as-is” purchase or closing sooner or later than they might like.
Renters are facing a low-inventory market, too. There are fewer apartments to choose from, causing rents to rise. Even if you are not in the market to buy or rent, prolonged low inventory can drive home prices up, impacting affordability.
Total housing inventory continues to make strides with 2.3 million existing homes available for sale at the end of the third quarter, a 6% percent increase from last year—but well below ideal levels for a healthy market, according to the National Association of REALTORS®.
Tips to Help You Find a Home in a Low-Inventory Market
As short sales and foreclosures retreat from America’s real estate scene, investors are losing interest. So don’t give up on finding the perfect home just yet. Instead, follow these tips to help you outwit the remaining investors and find a home sooner rather than later.
Follow the inventory: Inventory varies by location, property type and price range. You will have more to choose from, and probably get more bang for your buck if you search for a house in an area with more availability.
Look for homes investors avoid: Investors tend to steer clear of homes that cannot be flipped or rented, such as those in gated communities. Some of these communities let investors get away with flipping and renting when the market was hurting, but with the housing market recovery, homeowner associations are cracking down on investor activity.
Don’t forget “expired” and “canceled” listings: Many people try to sell their house by listing it on an MLS—but fail to complete a sale. Those listings become “expired” or “canceled.” Have a REALTOR® assist you in finding a home that is not currently on the market.
Seasonal patterns can favor buyers: Remember there are clear seasonal patterns for housing inventory. Identifying these patterns with a REALTOR® in your area can open up more opportunity for a great home purchase.