There are multiple reasons for the current lack of housing inventory, and there may not be an easy way to correct it.

We have previously spoken about the fear of missing out in the real estate market (FOMO).  Rising prices and rising interest rates are creating a sense of urgency among buyers – especially Millennials who are entering the prime age of needing more space for their growing families. The prime problem today is that there are not enough houses to purchase.  The term “lack of inventory” has become synonymous with the real estate market today.

There are several drivers of this lack of inventory.  For one, baby boomers are holding onto their suburban houses far into retirement.  The rising value of their real estate has actually made it easier for them to afford their spacious homes, making the need for downsizing less of an issue. An additional factor in play involves an issue we have rarely seen before in our history – the fear of not having a home into which they can transition.

Imagine a spouse saying – Honey, if we sell, we could get hundreds of thousands for our home which would help us afford retirement.  Now imagine the other spouse replying – But where would we live? There are no homes for sale.  How to solve this conundrum? We need more listings, but those who could provide the listings are hesitating.  Higher interest rates may actually help, because they could slow buyer demand.  Builders continuing to ramp up production as supply chain issues ease could also ease the shortage. There is no easy way out—but eventually a balance will be restored.