There’s no doubt that the housing market has been unpredictable ever since last fall when interest rates began rising. What was interesting, however, was that prices were not impacted as much as one might expect. Between inflation concerns, volatile interest rates, and general economic uncertainty, it’s been difficult to make any long-term predictions about the real estate market. However, one factor that probably has had the biggest effects on the real estate market – and has long been a bane to real estate agents and homebuyers alike – is a lack of inventory. And many experts are predicting very low inventory levels throughout the remainder of 2023.
Low inventory has been an issue in the real estate market for many years and is one of the biggest reasons home prices have not nosedived in the current economic climate. In most areas, especially in places like the San Francisco Bay Area, there are simply not enough homes for sale to meet the demand of buyers.
For sellers, this means that now could be an opportune time to list their home for sale.
How Low Inventory Impacts the Housing Market
A shortage of inventory presents an opportunity for sellers because it creates competition among buyers. With fewer homes on the market, buyers are more likely to place offers quickly and bid close to, if not above, the asking price.
According to the National Association of Realtors (NAR), the housing inventory is currently low, with the supply of homes on the market significantly below the balanced market threshold of six months. In February 2023, the total housing inventory was 980,000 units, which was the same as January and up 15.3% from the previous year. Unsold inventory is currently at a 2.6-month supply, meaning that it would take only that long to sell the current inventory at the current sales rate.
To illustrate this point, an agent on my team recently received over 100 offers on a new listing, proving just how competitive the housing market can be in times of low inventory. It further demonstrates that when a property is in great condition and priced right, there will be a flood of buyers. In fact, data from the NAR shows that multiple offers are on the rise again, after a slowdown since the fall of 2022.
Another advantage is the fact that with fewer listings for buyers to consider, your property could become more desirable than if there were more homes for sale. This, in turn, may result in a higher sale price or quicker sale time than if competing homes were also on the market at the same time.
How to Sell a Home Under Low Inventory Conditions
In times of low inventory and high demand, it’s highly likely that a seller will receive multiple offers, which is commonly understood as a bidding war. However, it’s not just as simple as throwing up a “For Sale” sign and watching the offers roll in. It’s important to work with an experienced real estate agent who understands the current market conditions – especially at a micro-level – and can provide an accurate pricing and marketing strategy.
In addition, it’s extremely important to prep your home for sale, which means making sure the interior and exterior of your home are in top condition before putting the property on the market. This includes necessary repairs and maintenance to make it attractive to buyers. You should also consider adding any upgrades that may add value or appeal to potential buyers. For example, replacing old fixtures and appliances, painting walls, and landscaping can help make your home stand out from the competition. Smart home technology upgrades can also be beneficial for today’s buyers who are looking for convenience and efficiency. With competition so high, buyers will be looking for any reason to choose another house over yours.
The real estate market is ever-changing, and it’s important to understand what factors are influencing sales in your local area. In the San Francisco Bay Area, the current real estate market presents a unique opportunity for sellers: low inventory levels are driving up demand despite an uncertain economic climate. Knowing the current market conditions and what steps you can take to make your home desirable will help ensure that you’re positioned to sell your house for top dollar.
