Why are there so few homes for sale?

We're all feeling the effects of not enough houses for buyers in certain areas, and there has been a lot of discussion regarding the low numbers of homes for sale throughout the US. But why are inventory levels so low, especially when the real estate industry was expecting a wave of home sellers after the ‘bust’ of 2008-2011?

An extended period of low mortgage rates: Given the sustained period of low interest rates, many homeowners and investors have either purchased or refinanced, and have locked into historically low interest rates over the past six years. It’s hard to make a “want” move when the rates are higher than your current mortgage rate.

Loss of home value in 2008-2009: Potential home sellers in many areas experienced a meltdown, not just in price, but in the ‘expected’ price. Then, buyers purchased properties in these neighborhoods at significant discounts from the high point, which caused more potential sellers to freeze.

In addition, an unprecedented number of investors entered the residential real estate market, buying homes to hold for the long term as rentals. These landlords are making very good returns on their money, generally better than other investment types, so they're not selling any time soon.

Values are not at peak levels in many neighborhoods: In some neighborhoods, areas sales prices have reached or even surpassed the peak levels in 2007, but this is not across the board. Until home prices reach what they were at the peak, many homeowners in these neighborhoods won’t be listing their homes for sale, either because they owe more, or because they 'feel' the house is worth more than the market says it's worth today.

Many homeowners think that values will continue to climb: There are many potential home sellers that believe home values will continue to rise. They feel they'll 'wait it out' until they can sell for the price they expect, which is not always based on market realities. It's just human nature to think what we own will gain value, a theory that is shown over and over in studies about how people hold stocks, even with evidence to the contrary.

The “where would I go?” question: Lower inventory begets lower inventory; a downward pressure cycle continues. If a potential seller can't find properties to move up to, they will not list or sell their current homes.

A lack of options for retirees: Many seniors are finding limited or no options for retirement communities in their local area. Seniors, as a market, do not sell unless they know exactly where they are going.

These are a few of the factors that have created the low-inventory environment we are in; we predict that inventory will remain low for an extended period of time, especially as interest rates rise.

-Chris Raborn and Zach Hosford, Towson Realtors, Keller Williams Excellence. Join us on Facebook, or Read our Blog for all the latest Towson Real Estate news.