Why Is Housing Inventory So Low & When Will It Increase?
Many buyers and sellers are asking, “When will housing inventory increase?” The limited supply of homes for sale has made finding the right property challenging, driving up prices and frustrating potential homeowners. To understand when conditions might improve, we’ll explore the root causes of low housing inventory, current trends that may signal relief, and how these factors specifically affect the Florida housing market.
If you’re considering Davenport, this guide on the pros and cons of living in the area can help you make an informed decision.
What Is Causing the Housing Inventory Shortage?
The housing inventory shortage in the U.S. isn’t just a recent phenomenon—it’s the result of multiple long-term trends and recent disruptions. From underbuilding to rising mortgage rates, let’s explore what’s keeping homes off the market.
1. Decades of Underbuilding
For over a decade, the U.S. has been building fewer homes than needed to keep up with demand. Between 2012 and 2022, the number of households grew by 6.5 million, but the construction of single-family homes fell far short of matching this growth. This imbalance created a structural deficit that we’re still trying to overcome today.
The Great Recession of 2007–2009 amplified this problem, with new home construction falling to a 35-year low. Even as the economy recovered, construction levels have remained below historical norms.
2. The “Lock-In Effect” from Rising Mortgage Rates
High mortgage rates are trapping homeowners in their current homes, discouraging them from selling. Over 90% of homeowners with a mortgage have locked-in rates below 6%, and about 22% are paying less than 3%. Moving to a new home would mean forfeiting these low rates and taking on significantly higher monthly payments, leaving many homeowners reluctant to list their properties.
3. Institutional Buyers and Investment Properties
Large institutional investors have taken advantage of the limited housing supply, purchasing single-family homes to convert into rentals. This trend has reduced the number of homes available to traditional buyers, especially in growing metropolitan areas.
4. Pandemic-Related Disruptions
The COVID-19 pandemic had far-reaching effects on the housing market. Labor shortages, supply chain disruptions, and surging demand for homes in suburban areas combined to exacerbate the inventory crisis. Even today, the effects of these disruptions linger, slowing new construction and straining supply.
When Will Housing Inventory Increase?
If you’re wondering when you might see more “For Sale” signs in your neighborhood, the good news is that relief could be on the horizon. Economists predict improvements in housing inventory in the next few years, fueled by new construction and stabilizing economic conditions.
1. Home Sales Are Poised to Rebound
According to Lawrence Yun, Chief Economist for the National Association of Realtors® (NAR), existing home sales are expected to grow by 9% in 2025 and an additional 13% in 2026. New home sales are also forecasted to rise by 11% in 2025, signaling a shift toward a healthier, more balanced market.
2. New Construction is Accelerating
Builders are ramping up efforts to address the housing shortage. Projections show that new-home construction could jump by 13.8% in 2025, adding more than 1.1 million new units to the market. These new builds will help alleviate supply pressures, especially in fast-growing areas.
3. Mortgage Rates Will Remain High but May Ease Slightly
While high mortgage rates have limited housing market activity, they are expected to ease slightly, averaging 6.3% throughout 2025 and ending the year at 6.2%. This is still above the pre-pandemic average of 4%, and experts caution that it may not significantly reduce the lock-in effect. However, a combination of slightly lower rates and increased home construction could provide some relief.
How the Florida Housing Market Stands Out
Florida’s housing market is unique due to its rapid population growth, high demand for real estate, and significant regional variations. With nearly 1,000 new residents arriving daily, the state’s population is projected to exceed 25 million by 2030, driving consistent demand for homes and rentals.
However, inventory challenges persist, with a 57% year-over-year increase in homes for sale as of March 2024, reflecting efforts to address shortages while still grappling with affordability issues. Home prices remain resilient, with the median price projected to rise modestly to $420,000 in 2025, supported by a steady influx of buyers attracted to Florida’s favorable climate and economic opportunities.
Despite its strengths, Florida faces notable challenges, such as rising insurance premiums due to frequent natural disasters and new condominium regulations that impose costly repairs, further straining affordability. Regional markets like North Port and Cape Coral have experienced sharp cooling, with increased inventory and declining price competitiveness. While mortgage rates are expected to stabilize, labor shortages and economic policies could impact construction and overall market dynamics moving forward.
See Current Homes for Sale in Davenport
The U.S. housing market may be challenging, but improvements are on the horizon. Florida’s market, in particular, continues to offer opportunities for buyers and sellers willing to adapt to changing conditions.
If you’re ready to explore your options in Florida, check out current homes for sale in Davenport. Whether you’re buying your first home or upgrading to a larger space, Davenport offers a range of beautiful properties to suit your needs. Start your journey today!
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