Home Buyers vs. Inventory: What You Need to Know in 2024

It’s true. The past few years have been challenging for most homebuyers.

Higher home prices and elevated mortgage rates have slowed the home-buying journey for most, especially first-time homebuyers. First-timers often have less buying power and benefit most from lower mortgage rates and stable home prices.

The high cost of purchasing a new home at a higher mortgage rate has kept many would-be home sellers out of the market as well, further curbing an already-limited housing supply.

All hope is not lost, however. The housing market might finally be entering a transitional phase.

Although still on the rise, home prices are rising at a substantially slower pace compared to 2020 and 2021. This slower pace is an important and positive factor towards a better housing market.

In this article (Skip to...)

• Where does inventory stand today?
• Inventory impact on home prices
• Effect on buyers and sellers
• Tips for today’s buyers
• Tips for today’s sellers
• Housing inventory forecast

Where does housing inventory stand today?

Since the pandemic, low inventory has vexed the U.S. housing market.

In February 2022, active listings hit an all-time low of just 346,511. In July 2024, although still below average, there were 884,273 active listings. That’s an increase of 155%.

In real estate, the term “months’ supply” is an important one. For both new and existing home markets, the months of supply converts inventory from a count of homes into a measure of how many months it would take for that count of inventory to be sold at the current monthly sales pace.

Housing economists typically advise a balanced market has 4-5 months of supply.

July 2024 saw a months’ supply of 7.5 months. This is a positive movement when compared to May 2023 when the months’ supply was at 6.9 months.

But there’s another months’ supply indicator worth noting: new construction months of supply.

Reportedly, May 2024 saw a months’ supply for new construction at 9.3 months. This means the building market for single-family homes is possibly oversupplied, implying declines for construction and home prices may lie ahead.

What is the impact on home prices?

Total home inventory (new and existing) is an important measure for gauging and forecasting home prices and home construction impacts. More inventory means lower or declining home price growth and home building activity.

When fewer houses are available, buyers are willing to pay more, and sellers have more leverage to raise their asking price. So, low inventory leads to higher home prices. It’s one of the main reasons home buying has become so expensive.

However, sellers may face challenges when they go from selling to buying a new home.

Effects on buyers and sellers

For buyers, it’s important to understand that low inventory levels can create a competitive market. We’ve seen this in recent years, resulting in bidding wars and higher home prices.

For sellers, on the other hand, lower inventory can work to your advantage. Low inventory can mean higher offers and faster sales.

And although it is better to be a seller than a buyer in today’s market, it is also challenging to be a seller. Most sellers hold a mortgage with a lower rate than today’s rates, so selling would mean not only potentially purchasing into a higher-priced market, but also taking on a higher-rate mortgage.

Despite a tight housing market, there are ways buyers and sellers can increase their odds for an ideal home buying and/or selling outcome.

Tips for buyers in today’s real estate market

• Monitor the market. Keep track of the available inventory, price levels, and how quickly homes are selling in the area you want to buy. Staying informed will not only help you spot a great deal but also give you confidence when moving forward with your purchase. A knowledgeable real estate professional can be a valuable resource in this process.
• Know your budget. Rather than fixating on the price, determine what you can comfortably afford as a monthly payment. Your monthly housing costs are influenced by factors like the home’s price, your down payment, mortgage rate, loan term, home insurance, and property taxes. This is where your lender can be a great asset.
• Bid competitively and stay flexible. It may be tempting to submit a low offer as a starting bid, but in a tight seller’s market, buyers should place their highest offer from the very beginning to avoid losing out on the home. In many instances, buyers with fewer contingencies and are flexible in areas such as their move-in date have better odds of winning the bid.
• Stay positive and patient. Buying a home is one of the most significant financial decisions you’ll ever make. Enter the market with confidence, backed by solid information and realistic expectations. Don’t get swept up in the frenzy of the market and allow it to pressure you into purchasing something that doesn’t fit your budget or lifestyle.

Tips for sellers in today’s real estate market

• Ensure your home is in excellent condition. To stand out in the market, your home needs to be in tip-top shape. Focus on enhancing its online curb appeal by maintaining your property well and ensuring the front yard is attractive—these are key features that attract buyers.
• Address issues promptly. Before listing your home, take care of any necessary repairs or improvements. By removing potential problems, you allow buyers to focus on the positive aspects of your home.
• Price your home correctly. Understanding market competition and pricing your home competitively is crucial. Setting the right price for your house has always boosted your chances of selling, but it’s especially important in today’s housing market. Gather the most current pricing information on similar homes in the area.
• Partner with a local real estate agent. Working with a real estate agent with a strong local presence and access to major real estate portals can have significant advantages. Their expertise can help you secure a great deal and navigate the selling process effectively.

Where can we expect to see housing inventory in the near future?

According to Realtor.com, in May 2024, there were 35.2% more homes for sale than a year earlier. May marked the seventh consecutive month inventory rose.

“The share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further,” said Realtor.com’s chief economist Danielle Hale. “Some much-welcomed news for prospective buyers.”

It’s important to note, however, the latest NAR Housing Affordability Index shows that challenges remain. The index receded to a preliminary reading of 93.1 in May. For context, a national index reading below 100 indicates that a median-priced home is unaffordable for the typical family earning a median income.

The bottom line for buyers and sellers

The combination of elevated home prices and low inventory is likely to keep the housing market challenging for both buyers and sellers throughout the rest of this year.

Fortunately, mortgage rates have been cooling down slightly. Lower rates help with affordability. If the increased inventory and lower rates trend continues, we could see an uptick in market activity as more buyers enter the market.

Given the intricacies of the current market, it’s more important than ever to stay informed and up to date about housing market conditions. Whether you’re looking to buy or sell in the remaining months of 2024, having a professional guide you through the process can make all the difference.