Home Inventory Crunch Eases But Would-Be Buyers Remain Pessimistic

The home inventory crunch is starting to ease but would-be buyers are still wary.

The National Association of Home Builders Housing Trends Report recently noted the inventory of unsold homes rose 3.3% to 1.25 million from May to June 2021, according to Realtor.com.

However, 64% of would-be buyers expect finding the right home will be harder or not change much, up from 54% in the last quarter of 2020, NAHB found in its polling.

“This shift in buyers’ perceptions on inventory correctly reflects the scarcity of homes available on the market in the first half of 2021,” the home builders group asserted.

Adding to their dismay over their housing searches, the share of potential buyers saying they saw more homes for-sale dropped to 38% and 33% in the first two quarters of this year compared to 41% in the last quarter of 2020. At the same time, the share of buyers seeing fewer/same number of homes on the market has risen for two consecutive quarters to 63% from 50% at the end of last year.

NAHB reported the decline in optimism about housing availability was prevalent in all four regions of the country between the final quarter of 2020 and the second quarter of 2021. In the Northeast, the association said the share of buyers expecting the house search to get easier dropped from 44% to 33%; in the Midwest, from 23% to 19%; in the South, from 32% to 29%; and in the West, from 40% to 25%.

While would-be buyers are discouraged, they are still looking.

“Mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be unwavering for now as buyer traffic reached its highest level since November,” NAHB Chief Economist Robert Dietz said this spring.

Despite strong buyer traffic, builders continue to face challenges to add much needed housing supply to the market, NAHB Chairman Chuck Fowke noted this year, pointing to a tight supply chain for residential construction, particularly the cost and availability of building materials such as lumber.

In February, Dietz cautioned a shortage of buildable lots is making it difficult to meet strong demand and rising material prices are far outpacing increases in home prices, which in turn is harming housing affordability.