More Homes for Sale Isn’t a Warning Sign – It’s Your Buying Opportunity

Maybe you’ve heard the number of homes for sale has reached a recent high. And it might make you question if this is the start of another housing market crash.

But the data proves that’s not the case. In most areas, more inventory isn’t bad news. It signifies the market returning to a more stable, healthy place.

What’s Going on With Inventory?

According to the latest data from Realtor.com, inventory just hit its highest point since 2020, shown by the white line in the graph below.

But what you need to realize is, at the same time, inventory levels still haven’t returned to pre-pandemic norms (shown in gray):

That means there are more homes for sale now than in quite some time.

While inventory is up significantly compared to the last few years, the number of homes on the market is still well below typical levels. That’s important context.

Why This Isn’t the Problem A Lot of People Think It Is

Some people hear inventory’s rising and immediately think about 2008. Because back then, inventory spiked just before the market crashed. But today’s situation is very different.

Here’s the key reason why. We don’t have a surplus of homes; we have a deficit to climb out of. We’re dealing with a long-term housing shortage – and it’s a big one.

The red bars in the graph below show all the years when housing started (new builds), but it didn’t keep up with household formation, going back to 2012. The deeper the bars in the graph, the more the housing deficit grew (see graph below):

One of the reasons this housing shortage kept growing was that new home construction didn’t keep up with the number of people needing to buy homes. The U.S. is short millions of homes, and it will take years to overcome that gap. Realtor.com says:

“At a 2024 rate of construction relative to household formations and pent-up demand, it would take 7.5 years to close the housing gap.”

That means, in most areas, there isn’t a risk of having too many houses on the market right now. It’s quite the opposite – a vast majority of homes.

Which is why, even though inventory is rising, it’s not a problem on a national scale. It’s just helping to fill a gap that’s been growing for years.

Bottom Line

Don’t let the headlines scare you. Rising inventory isn’t a sign of a crash. It’s a step toward a more normal, stable housing market.