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Facts about housing inventory and how it affects you

On Behalf of | Jan 24, 2023 | Real Estate Transactions |

Supply and demand are primary driving forces in any economy. The idea that the scarcer the product, the higher the cost is undoubtedly the case in real estate markets. Keep reading to see how the low housing inventory affects buyers, sellers and tenants in Virginia and throughout the United States.

Factors causing low housing inventory

Several converging factors are affecting the availability of homes. Here’s an overview of the current situation:


During the pandemic, many sellers feared letting strangers go through their homes and didn’t sell unless they had to. This shortage of listings drove the prices up. Employees forced to work remotely during the pandemic later chose that as a permanent option. They purchased homes further away from business hubs, lowering housing inventory in the suburbs.

Limited new construction

The pandemic also affected supply-chain dynamics. With so many people quarantined at home, new home construction rates fell. Many construction materials come from China, whose Covid policies forced entire manufacturing cities to shut down. With fewer employees, a lack of materials and rising prices, fewer new single-family homes entered the market. However, many of the completed projects were multifamily and rental apartments. This increase in the supply of rental housing should lower rents, which skyrocketed in some areas in 2022.

Institutional investors and millennials

Institutional investors and millennials are active participants in the current real estate market, increasing the demand. The upside of institutional buying is that many of these homes will be rentals, which should be one more factor decreasing the rents as the supply of properties increases.

Effect on sellers

Low inventory is generally good for sellers because the property should sell eventually, although higher mortgage rates keep listings on the market longer in Virginia and other states. However, even with a longer marketing interval, this may be a good time for sellers to try to sell the property themselves without the assistance of a real estate agent. Put a For Sale By Owner sign in the front yard and see what happens. Make sure someone reviews the contracts before you sign anything.

Effect on buyers

If listings take longer to sell, this is good news for buyers because increasing inventory gives them more choices. However, if interest rates remain high, many potential buyers may have to rent until the market stabilizes and interest rates fall.

It may be a few years before the housing inventory normalizes. Plan for the future and act when the time is right for you.