How Much Does Inventory Affect the Real Estate Market?

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It’s normal and expected for real estate inventory to go up and down over the years, and these fluctuations impact home prices and availability. It all comes down to supply and demand: if home inventory is low, then competition goes up and buyers start offering more for the available properties.

Before COVID-19 happened, we were already hitting low inventory records. Through the pandemic, the real estate market stayed strong and we saw inventory drop even more because of the continuing demand.

What Happens When Inventory is Low

When you hear a real estate agent talking about low inventory, it means that available homes on the market aren’t enough to meet the demands of current homebuyers. Not only are there limited homes listed for sale, but the transactions are happening fast – which has an impact on both sellers and buyers.

When inventory is low, we can expect that home prices will increase. Eventually, the market finds equilibrium and the prices will flatten out. Other industry factors can also affect inventory, such as mortgage interest rates. Low rates incentivize more people to buy homes, which means inventory is more competitive when low interest rates are available.

How Sellers and Buyers are Affected by Low Inventory

Decreases in real estate inventory have an impact on both buyers and sellers:

  • Buyer: Competition goes up when there are limited homes and a lot of people ready to buy. You need to be proactive about fast offers and flexibility with the terms of the sale. Many homes are selling as soon as the listing goes live, which means you can’t wait to send an offer. Also, expect to pay more than the asking price.
  • Sellers: If you are selling a home and there is low inventory, then you will likely receive multiple offers within the first 1 – 2 days of listing your property on the real estate market. The benefit of selling right now is that you can get a high price for your home.

When Should I Buy or Sell?

Timing matters in the real estate industry. But the most important thing that will affect your success is when you are focusing on the long game. Regardless of what is happening in the real estate industry at any given moment, you can still buy a home and gain the equity benefits in the long run.

Don’t stress about the market. Instead, focus on the needs of your family and work with an experienced real estate agent. If you are ready to buy or sell a home, then reach out to me for more information. Call, text, or email at (951) 473-0390 or [email protected].