By now, the data showing falling inventory every week isn’t a surprise. Even though it’s March — a time when normally we would expect inventory to increase each week as the peak home buying season is almost upon us — sellers are holding back. There is no sign of a surge of sellers, no panicky investors selling, almost no one out of work in the U.S. and so there are no distressed sellers either. Most homeowners have locked in low mortgage rates, so no one is looking to unload that either. Even if it’s time for them to move, most people are still not selling their homes.
As a result, the steep slowdown of the housing market from 2022 has largely passed us. Now, we have good visibility on many of the trends for the remainder of 2023. These trends could change if we have a dramatic recession, start to get big job losses or if mortgage rates spike over 7% on strong economic data. There are risks to a renewed downturn in housing, but the data as of right now is very stable. It’s going to be hard for the most bearish housing market predictions to take shape this year.
Inventory
Available inventory of single-family homes for sale in the U.S. dropped by another 1.5% this week to only 412,000. In 2022 at this time, there were 248,000 houses on the market, but that number was beginning to climb. In 2022 by mid-March, inventory was steeply increasing compared to the crazy record lows of the COVID-19 pandemic. Inventory was so low in 2022 because Americans had been buying everything in sight, taking advantage of the last few weeks of ultra-low mortgage rates. After February, demand slowed way down and inventory finally started to build.
This year’s inventory decline isn’t about buyer demand, it’s about sellers. As I mentioned, there are no reasons for anyone to be selling their house right now. So while the data shows there are 66% more homes on the market now than in 2022, that margin is shrinking. Each week there are fewer homes on the market; meanwhile, in 2022 each week there were more homes on the market.
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