How National Home Inventory Influences Your Home Purchase

Estimated reading time: 2 minutes

When exploring the dynamics of your local housing market, a crucial factor to consider is home inventory. But what exactly does this term mean, and why does it matter to both home buyers and sellers? Let’s dive deeper into how inventory shapes markets, why it fluctuates, and how it can affect your homebuying strategy.

What is Home Inventory?

Inventory refers to the count of properties that are actively on the market and listed for sale. Major economists measure inventory levels as months’ supply. This refers to the amount of time it would take for the current level of available homes to sell given the current sales price.

Inventory is calculated monthly by taking a count of active listed properties on the last day of the month. Whenever a seller or a seller’s agent lists a home, it’s added to inventory counts for the following month. When a property goes under contract, it becomes a pending sale and is removed from the count.

Why is Home Inventory Important?

As a measurement, home inventory can assist in forecasting how home prices and construction starts impact the overall market. Typically, when a market has more inventory, there is weaker or declining price growth.

During the COVID-19 pandemic, inventory was affected by high material costs, supply chain stalls, worker shortages, and a high demand of homebuyers trying to leave major cities. CoreLogic reported that home prices rose 25.55% annually in June, 2021 while Realtor.com data showed inventory declined 42.1% that same month.

As we begin to see new construction starts across the country this year, the same CoreLogic dataset shows the annual price growth for June, 2024 sits at just 1.89%. Realtor.com also reported a 36.7% increase in inventory.

Can You Be a Competitive Buyer When Inventory is Low?

When there’s less inventory available, sellers may be more likely to increase their property prices because there is less competition. Buyers may face bidding wars as they compete for a smaller number of houses.

To stay competitive, buyers should utilize available resources to acquire the home that they want. A real estate agent and mortgage pre-approval can help ease seller anxieties about a sale falling through.

Ready to achieve your homeownership dreams? Contact us today to learn more about creating your market advantage.