Buying a home is not an easy proposition these days. Even if you can afford a mortgage loan, you might run into issues with not being able to find a property that suits your needs.
As of the end of September, there was only a 3.4-month supply of homes on the market, according to the National Association of Realtors. For context, it can take up to a 6-month supply of homes to meet buyer demand in full.
But it’s not as if housing inventory plunged in September specifically. Rather, housing inventory has been stuck in a rut all year. And things are likely to continue that way well into 2024 — and possibly beyond — due to one big factor.
Mortgage rates are keeping homeowners put
In 2020 and 2021, mortgage lenders were offering up record-low rates to fuel buyer demand. These days, however, mortgage rates are sky-high. And that’s keeping a lot of people from listing their homes and opening up the market.
As of Nov. 2, the average 30-year mortgage rate was 7.76%, according to Freddie Mac. The average 15-year mortgage rate was 7.03%.
By comparison, in 2020 and 2021, buyers were locking in 30-year mortgages at around 3%, and 15-year mortgages could be had for well under 3%. And it’s not just buyers who capitalized on those ultra-low rates. Many existing homeowners rushed to refinance their mortgages to take advantage as well.
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As such, we now have a lot of property owners sitting on affordable mortgages who don’t want to swap them for a rate in the 7% range. And that’s understandable.
But until mortgage rates start to come down, housing inventory is unlikely to increase. And since rates might remain stubbornly high well into 2024 and possibly beyond, we could be in for many more months of stagnant inventory.
How to cope with limited inventory as a buyer
When you’re trying to purchase a home, not having much of a selection can be tough. It’s one thing to have to choose an evening gown for an upcoming gala when your go-to store only has three dresses in your size. You may not get exactly what you want, but you’re probably only wearing the dress once or twice. And you’re probably (or hopefully) not spending your life savings on it.
But a home purchase is totally different. There are only so many compromises you can make when you’re talking about a place you might live for the next decade or longer.
One thing that might help you navigate today’s housing market, though, is reminding yourself that homes can be updated. So as long as you buy a home that’s large enough to meet your needs, you can worry about some of the details later on.
For example, you may not want to spend the next 10 years living in a home with a lime green kitchen featuring linoleum flooring. But if you find a home with a sorely dated kitchen that has good bones and is large enough for your family, you could always buy it, gut the kitchen, and turn that space into whatever you want it to be.
Similarly, your wish list for a home might include things like a fenced-in yard and a nice deck. If those features aren’t available, find a home that just plain has a yard. You can fence it in and build a deck later on, as money allows for.
In an ideal world, you’d be able to buy a home that offers everything you’re looking for. But at a time when inventory is so limited, that may not happen. So do your best to be flexible and focus on properties that have the potential to become your dream home — even if they don’t start out that way.