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What does “low inventory” mean for home buyers and sellers?

a woman in red dress beside the 'for sale' signage

When a housing market is said to have a low inventory, it means that the volume of available homes is limited or in short supply. Often, this means that the number of properties for sale do not meet the demand of current homebuyers in the market.

How do home sellers benefit from low inventory?

When there are more buyers than there are available homes for sale in an area, the local housing market is considered a “seller’s market.”

In this scenario, home sellers have the advantage because the shortage of available homes drives up home prices. In many instances, listings in a seller’s market figure into bidding wars among determined buyers, boosting home sellers’ opportunities to earn from their home sale. Even without a bidding war, sellers still have an advantage at the negotiation table when the supply of available homes is low.

In addition, when home prices rise, so does the equity that a homeowner can gain in their property. Equity refers to how much of a property you actually own, as opposed to what you still owe to a lender through your mortgage. The more you pay off your home loan, the greater your equity in the property. Similarly, when low inventory drives up the value of your home, you get a greater return on your investment because your equity also increases.

Current real estate conditions across the nation can be described as a seller’s market, given the low supply of available homes for sale relative to the number of active buyers. If you are thinking about selling your home, now would be a good time to take advantage.

How homebuyers should approach a low-inventory market

In general terms, a housing market with low inventory should give buyers pause about their plans. The best course of action would be to wait until inventory increases and causes home prices to level off.

In 2021, however, despite prevailing market conditions that favor sellers, homebuyers have plenty of reasons to remain encouraged about getting good deals for quality real estate.

Low mortgage interest rates are an important factor to consider. As of mid-April, interest rates for 30-year fixed-rate home loans remain around the historically low 3% range. These low rates will allow you to take advantage of lower monthly mortgage payments over the long term if you push through with your buy a house now.

Buying now may also prove to be a strategic move if housing supply fails to catch up with buyer demand anytime soon. Instead of waiting for the market to slow, it might be more practical to act now because the persisting imbalance of demand and supply may eventually price you out of your housing market. As long as you are financially secure—i.e., you have a stable source of income, a manageable debt-to-income ratio, and adequate savings—you can go ahead and pursue your homebuying goals with confidence.

If you are a current or aspiring homeowner in Dryden, Rock Island, or Cashmere and you want to learn more about how the local real estate market works, get in touch with the local experts at Coldwell Banker Cascade Real Estate. Call 509.888.8887 or email info(at)cbcascade(dotted)com today.