The ups and downs of home inventory in 2024

As mentioned above, housing inventory has made some great strides in the past two years, but is significantly lower than pre-pandemic levels. There is currently a 3.6-month supply of home inventory (meaning that’s how long it would take to sell those homes at the current pace) instead of a five- to six-month supply, as we would find in a healthier, more balanced housing market.^Footnote2

The lack of inventory makes this a seller’s market. Sellers are typically fielding multiple offers, many over asking price, and while waived contingencies are not as common as they were during the height of the pandemic, they are still a tool some potential homebuyers use to vie for a competitive edge. These days, a truly good home doesn’t stay on the market long.

Of course, the main culprit for the current low housing inventory is the fact that over 82% of current U.S. homeowners have a mortgage rate below 5%. 62% have a rate below 4%.^Footnote3 At the time this article was written (early March 2024), the average mortgage rate hovers around 7%.

While home prices have risen considerably in recent years, the profit from selling a home is offset by the steep increase in monthly mortgage payments that come with these much higher mortgage rates. To stay at a similar monthly payment, homeowners would have to settle for less home.

The only homeowners incentivized to sell a home are those that own multiple properties and won’t have to buy another home — which is, of course, a miniscule portion of the market.

With the majority of current homeowners locked in to sub-4% and sub-5% rates, new construction is the best bet for a surge in housing inventory in the near-future. And since more single-family home construction permits were issued in October 2023 than in any other month last year,^Footnote2 that surge in inventory may be just around the corner.

But new homes are not built overnight. According to the U.S. Census Bureau, new privately-owned residences take an average of 7.6 months to complete.^Footnote4 Eager prospective homebuyers may find they have to hurry up and wait for new construction.

One of the more fascinating aspects of the current housing inventory story is the differences from region to region and city to city.

As the chart above shows, from February 2023 to February 2024, Miami’s inventory shot up from 25,500 to 35,000, New York City’s inventory dropped from 30,200 to 27,200, and Boston’s inventory remained virtually unchanged, going from 3,400 to 3,300.

Generally speaking, southern states are seeing more inventory growth than their northern counterparts. For instance, from February 2022 to February 2024, Houston’s inventory nearly doubled from 11,000 to 20,700, Atlanta’s inventory doubled from 7,800 to 15,500, and Dallas’s inventory quadrupled from 4,100 to 16,000. In that same time frame, Chicago’s inventory dropped by 500 homes and Philadelphia’s saw a meager rise from 6,600 to 7,600.

So, regardless of the national average, two crucial factors in how the housing inventory will affect a prospective homebuyer are where they are moving from and where they intend to move to.

If the new construction continues its trend toward growth, that added inventory will make the market somewhat more favorable for potential homebuyers. And since the Fed has pledged to cut rates three times by the end of 2024,^Footnote5 more existing homeowners may find the financial climate more amenable to putting their home up for sale and moving on to greener pastures.

The bottom line is that housing inventory is trending upward incrementally and looks to continue to do so. We’re unlikely to see the explosive growth in inventory that we saw during the pandemic. No one could have predicted that unprecedented global event and its drastic and long-lasting effects on the real estate market and the economy as a whole.

If the economy has truly avoided a 2024 recession (as many economists have forecasted it has), and inflation continues to drop, that incremental growth in housing inventory will continue onward and upward.