More inventory is both the consequence and the cause of a more balanced housing market: more choice for homebuyers limits the number of buyers bidding on each home, and increased competition ignites a competitive fire under sellers and their listing agents to make their homes shine, including pricing it competitively. Inventory could rise enough later this year to slow the frenetic pace of the market (the median home seller accepted an offer in just 6 days in April).
But the market is so overheated right now that it will take time to reach that equilibrium. At the rate it is currently recovering, stocks would take around 30 months – September 2024 – to reach pre-pandemic 2019 levels.
If you trust the wisdom of the crowds, check out the nearly 100 housing market experts surveyed by Zillow last quarter, who we challenged with this same question: 38% said they expect stocks to recover by the end of 2024, just ahead of 2023 (37%) as the most cited year.
The important thing to remember is that this rebalancing should in no way cause fear of a crash. We’re talking about slowing persistent double-digit price growth to normal levels – not even a price crash, let alone a crash.
Millions of millennials entering their early years of home buying will keep demand high. It’s not even enough to fix our affordability crisis, because higher interest rates will make home ownership expensive and prices will continue to rise.
In fact, waiting for another accident could contribute to making the houses so unaffordable. The builders fired at full throttle and, with more houses under construction than ever since 1973, they naturally feel exposed in the event of a housing downturn.
If they scale back their construction plans out of caution, we will miss one of our best hopes for net new inventory in the market, and the inventory crisis that has helped push prices higher will linger longer than expected.
This column does not necessarily reflect the opinion of the editorial staff of HousingWire and its owners.
To contact the author responsible for this story:
Jeff Tucker at [email protected].
To contact the editor responsible for this story:
Brena Nath at [email protected]
Jeff joined Zillow in March 2018 as an analyst on the economic research team while completing his PhD. in economics from the University of Washington. It studies the causes and consequences of changes in supply on the housing market. Prior to joining Zillow, he analyzed competition in markets from television to soda bottling as an economic consultant in merger review and antitrust litigation.