Housing Inventory Rose in January. Here's Why You Might Still Struggle to Buy
An uptick in housing inventory is a good thing. But buying might still be a problem. Read on to learn more.
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If you've been in the market for a home, you may, at this point, be extremely frustrated. And who could blame you?
Buyers today face the double whammy of elevated home prices and expensive borrowing rates from mortgage lenders. And while mortgages may get a bit less expensive to sign later on in 2024 as the Federal Reserve gears up to cut interest rates, there's still the issue of higher home prices to contend with.
But a big reason home prices are so elevated is that there's not a lot of inventory to choose from, which gives sellers an upper hand. And even though real estate inventory actually rose in January, there's still a pretty major shortage of available homes overall.
Inventory remains sluggish
In January 2024, the inventory of unsold existing homes increased 2% from a month prior, reports the National Association of Realtors. The problem, though, is that even with that increase, the market is looking at just 1.01 million homes for sale, or the equivalent of a three-month supply.
It often takes a six-month supply of homes for there to be enough inventory to meet buyer demand. So clearly, even with an uptick, the market still lacks inventory.
And a big reason boils down to mortgage rates. Because it's still an expensive time to put a mortgage in place, many existing homeowners aren't budging. Rather, they're staying where they are to hang on to the lower mortgage rates they currently have. So until mortgage rates come down to a notable degree, housing inventory is likely to remain stagnant.
How to navigate a real estate market with limited inventory
Limited real estate inventory is a clear challenge for buyers today in part because it's driving home prices up. But one thing you may want to consider when searching for a home is adjusting some expectations and being open to a starter home.
Starter homes tend to be less spacious and updated. But they're a great way to break into homeownership and get used to the work involved in owning a place of your own.
If you buy a starter home with the intent to stay for only five or six years, that gives you an opportunity to build up some equity in your home that might make it easier to upsize down the line, once borrowing for a home becomes more affordable and inventory opens up. If you're set on buying a larger and more updated home in today's market, you may end up in over your head financially.
Another thing you can try to do is negotiate with your seller if you're a buyer with flexibility on when to move (such as if you have a month-to-month lease and your landlord is in no hurry to see you go). You may, for example, be able to get a buyer to lower their asking price if you're willing to be flexible with your closing date to suit their needs.
As mortgage rates start to drop, housing inventory should start to open up. But we're not there yet -- not even close. So for now, your best bet may be to look at a starter home as an opportunity to get your feet wet and set yourself up for a more desirable property down the line.
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