An inventory shortage occurs when the demand for goods or services exceeds the available supply. Low housing inventory has, at some level, remained an issue since the 2008 housing crash. With fewer houses on the market than buyers, the inevitable result is an increase in real estate prices that could have long-term economic implications. Today we’ll discuss all factors that led to this shortage, why 2023 could be an excellent time to buy, and how home ownership can protect you against high inflation.
Why is there an inventory shortage?
Inventory shortages result from rising materials costs, supply chain issues, and labor shortages due to COVID. The pandemic disrupted supply chains, halted production, and created a perfect storm for inflationary pressures.
While the Feds try to combat inflation, they are simultaneously impacting the housing market. Plus, this makes sellers pump the brakes on their plans to sell their homes as they will not get top dollar figures as they would have just six months ago.
How low inventory affects buyers
The home-buying climate in the United States is increasingly competitive. With historically low levels of available inventory and more buyers than ever met with extraordinarily high-interest rates – it’s making things difficult for those looking to purchase.
This can lead to bidding wars between interested buyers, driving prices up beyond the budgets of many prospective homeowners.
Increasingly frequent all-cash offers from investors further stacks the odds against buyers needing financing to purchase. While there are still deals for savvy shoppers, finding them requires extra effort and foresight to stay ahead of other applicants.
How low inventory affects sellers
Low home inventory levels in the United States have caused a ripple effect, impacting home sellers in several ways.
As demand exceeds supply, it has driven up the price of homes; as a result, sellers can receive higher offers than they would have in prior years. Moreover, due to low inventory levels, homes on the market generally don’t remain there very long.
Why buy now?
Despite high-interest rates in the United States in 2023, now can be an excellent time for first-time homebuyers to purchase a home.
Many incentives and programs are available to help ease the burden of high-interest mortgages. Moreover, specific plans such as down payment assistance provide almost free money to those purchasing their first home. This helps to offset some of the financial strain caused by higher interest rates.
All this makes now a good time for potential homeowners to take advantage of both market conditions and federal assistance programs and take that crucial step into homeownership.
Shield yourself from the effects of inflation with home ownership
Owning a home can be one of the most important investments you make. Homeownership can help shield you from the negative effects of inflation, as real estate values tend to increase with inflation-driven increases in income and wages. With home ownership, you can also avoid paying higher rent costs when inflation rises; rent prices generally correlate directly with the cost of living increases due to inflation.
Last but certainly not least, another home benefit has a fixed loan means your interest rate will remain constant, no matter how much other loan costs might spike due to inflation. These factors all contribute towards home ownership being an attractive solution for protecting yourself from the consequences of inflation.