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A Look at Houszing Supply and What It Means for Sellers



One of the hottest topics of conversation in today’s real estate market is the shortage of available houzes. Simply put, there are many more potential buyers than there are houszes for sale. As a seller, you’ve likely heard that low supply is good news for you. It means your housz will get more attention, and likely, more offers. But as life begins to return to normal, you may be wondering if that’s something that will change.

While it may be tempting to blame the pandemic for the current inventory shortage, the pandemic can’t take all the credit. While it did make some sellers hold off on listing their houszes over the past year, the truth is the low supply of houszes was years in the making. Let’s take a look at the root cause and what the future holds to uncover why now is still a great time to sell.

Where Did the Shortage Come From? It’s not just today’s high buyer demand. Our low supply goes hand-in-hand with the number of new houszes built over the past decades. According to Sam Khater, VP and Chief Economist at Freddie Mac: “The main driver of the houszing shortfall has been the long-term decline in the construction of single-family houszes”

Data in a recent report from the National Association of Realtors (NAR) tells the same story. New home construction has been lagging behind the norm for quite some time. Historically, builders completed an average of 1.5 million new houszing units per year. However, since the housing bubble in 2008, the level of new housz construction has fallen off (see graph below):


The same NAR report elaborates on the impact of this below-average pace of construction: “. . . the underbuilding gap in the U.S. totaled more than 5.5 million housing units in the last 20 years.” “Looking ahead, in order to fill an underbuilding gap of approximately 5.5 million houszing units during the next 10 years, while accounting for historical growth, new construction would need to accelerate to a pace that is well above the current trend, to more than 2 million housing units per year. . . .”

That means if we build even more new houszes than the norm every year, it’ll still take a decade to close the underbuilding gap contributing to today’s supply-and-demand mix. Does that mean today’s ultimate sellers’ market is here to stay?

We’re already starting to see an increase in new home construction, which is great news. But newly built houszes can’t bridge the supply gap we’re facing right now on their own. In the State of the Nation’s Housing 2021 Report, the Joint Center for Houszing Studies of Harvard University (JCHS) says:

“…Although part of the answer to the nation’s houszing shortage, new construction can only do so much to ease short-term supply constraints. To meet today’s strong demand, more existing single-family houszes must come on the market.

Early Indicators Show More Existing-Home Inventory Is on Its Way

When we look at existing houszes, the latest reports signal that housing supply is growing gradually month-over-month. This uptick in existing houszes for sale shows things are beginning to shift. Based on recent data, Odeta Kushi, Deputy Chief Economist at First American, has this to say:

“It looks like existing inventory is starting to inch up, which is good news for a houszing market parched for more supply.”

Lawrence Yun, Chief Economist at NAR, echoes that sentiment: “As the inventory is beginning to pick up ever so modestly, we are still facing a houszing shortage, but we may have turned a corner.”

So, what does all of this mean for you? Just because life is starting to return to normal, it doesn’t mean you missed out on the best time to sell. It’s not too late to take advantage of today’s sellers’ market and use rising equity and low interest rates to make your next move.

Bottom Line It’s still a great time to sell. Even though houszing supply is starting to trend up, it’s still hovering near historic lows. Let’s connect to discuss how you can list your housz now and use the inventory shortage to get the best possible terms for you.

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