Winter is coming. Game of Thrones fans, you’re welcome. But it looks like winter might be coming early.
I pulled this chart for this month’s economic update since I believe it really tells the story of today’s market. It’s not just interest rates affecting the industry, even though that seems to be all anyone talks about – it’s also about available inventory. Simply put, we don’t have nearly enough houses for buyers to buy.
Let’s get the interest rate stuff out of the way first. Yes, this is one of the components that is putting downward pressure on inventory, but it isn’t the sole reason. It is one of the factors that impacts affordability, and we have an affordability problem.
However, buyer demand is still high, even with the elevation in interest rates. The problem is we don’t have nearly enough houses for them to buy. This is why you see folks like Warren Buffet investing big into new home builders (to the tune of 700 million per this article) because they can add inventory to this strapped market.
Back to the chart now. You can see the dip in January of 2022, that is normal seasonality. What we don’t usually see is the steep drop in the summer. Sure, it starts to slow down, but not to January levels. That could indicate that this winter will be even slower than last year.
The why is mostly a supply side problem and not a demand side problem. So if any of you are thinking of putting your home on the market, this could be a window. If any of you have ever considered starting home building, now is the time.