Mortgage rates are hovering at historic lows and forecasted by experts to remain favorable throughout the year, the real estate market is therefore expected to do very well in 2021. However, the lack of homes available for sale today is one of the challenges to the housing industry. The National Association of Realtors (NAR) released their Existing Home Sales Report last week, whereas it shows that the inventory of homes for sale is currently at an all-time low.

The report explains:

“Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago (1.39 million). Unsold inventory sits at an all-time low 1.9-month supply at the current sales pace, down from 2.3 months in November and down from the 3.0-month figure recorded in December 2019. NAR first began tracking the single-family home supply in 1982.”

(See graph below):

*photo credit to Keeping Current Matters.com

What Does This Mean for You?

If You’re a Buyer:

Be patient during your home search. Finding the home you love may take time. But once you’ve found it, be ready to move forward quickly. Get pre-approved for a mortgage, be prepared to make a competitive offer from the start, and keep in mind that a shortage in inventory could mean you’ll enter a bidding war. Calculate just how far you’re willing to go to secure a home and lean on your real estate professional as an expert guide along the way. The good news is, more inventory is likely headed to the market soon, Lawrence Yun, Chief Economist at NAR, notes:

“To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes…However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand.”

If You’re a Seller:

Take note that, in some ways, you’re in the driver’s seat. Whenever there’s a shortage of an item at the same time there’s a strong demand for it, the seller is in a good position to negotiate the best possible terms. Regardless if it’s the price, moving date, possible repairs, or anything else, you’ll be able to request more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Don’t be unreasonable, but understand you probably have the upper hand.