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Understanding Why Real Estate Inventory is Low and How to Profit From It

Posted by Tammy Powell on September 7, 2016 at 1:42 PM

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According to a recent article from the Trulia blog, real estate inventory across the country has been declining since 2012. The article also states that the inventory of starter and trade-up homes is down more than 40% during that time.

But while the experts at Trulia are discussing why this is such a bad thing for the real estate industry on a macro level, there are plenty of individual people all over the country who are turning a profit based on this shortage of inventory.

How is that possible? Let’s start by understanding exactly why there are so few homes being listed for sale right now.

low-inventory.jpgVictims of the Last Crash

One of the biggest problems that we are still struggling with in 2016 is the mindset of people who got hurt in the real estate crash back in 2008. Many people who purchased their homes right before the crash are still underwater, which makes it very difficult for them to sell since they owe more than their homes are worth.

Shortage of Upgrade Homes

The inventory shortage is actually able to feed on itself since the lack of premium homes on the market limits the options for people who currently own starter homes. Even if they wanted to sell those starter homes, there aren’t enough options for them to upgrade into.

Investment Properties Are Cash Flowing

People who invest in single-family homes as rental properties aren’t interested in selling right now either. That’s because rental rates continue to cruise higher and higher. And with a dramatic shortage of inventory available, there is not going to be a shortage of renters anytime soon.

New Construction Numbers Are Low

One thing that could circumvent all of these other issues and inject some inventory back into the market is an influx of brand new construction. But new construction still hasn’t come back to the levels it was at back in 2007, and it will probably still be some time before it does.

Millennials Prefer to Rent

Another reason that new construction isn’t coming back is that our population is being more and more influenced by millennials who prefer to rent in urban environments than buy in the suburbs. This trend could have an even more dramatic impact on the type of new construction that companies focus on over the next decade.

How You Can Benefit from Low Inventory

So now that we understand why real estate inventory is low across the country, let’s talk about how we can go about profiting from this situation.

The answer lies in simple economics: supply and demand.

When supply is low, demand has no choice but to rise. Have you noticed how quickly some of the houses listed in your neighborhood have been selling? And are those houses selling for more than you thought they could possibly be worth?

While low inventory numbers might mean that this is a bad time for the real estate market as a whole, we believe that there has never been a better time for individual clients to list their homes.

Simple supply and demand analysis shows that you will likely be able to sell your home faster, and for a higher price, than at any previous time in history.

It is most definitely a seller’s market, and your local Carrington Real Estate Services professional can help you take advantage of it. Contact an agent today.

Topics: Seller Resources, Buyer Resources, Agent Resources

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