Home Inventory Shortage
Starting 2021, the Wisconsin Realtors Association announced available home inventory was down almost 40%, especially in the under $400,000 price range. Remember supply and demand lesson in high school economics? When there is a shortage of supply it forces a lot of buyer competition and drives prices up. That’s what is happening in the housing market right now.
I pulled statistics as of March 9th 2021 from the MLS data and broke the housing inventory down to municipalities and price ranges. For purposes of charting this data we took active homes (which includes pending contracts) and divided that by the number of houses sold in the last 12 months. Dane County overall was at 1.4 months’ worth of inventory, and of those homes on the market, 60% were already under contract. Belleville, Waunakee, and Westport showed the most homes available, while Monona, McFarland and Sun Prairie were tightest on inventory.
The price range with the most limited inventory is currently under $350,000. The largest supply is in the $500,000 – $600,000 price range. While you probably still won’t find a killer deal in that range, there might be some opportunity if you are moving up in home. For example, if you are selling a home for $350,000 there will be plenty of buyers competing for your home, and if you are upgrading to a $550,000 home, you could face a little less competition there.
So, why is inventory low? Some factors in low inventory might be the fact that many families are working and doing education virtually; so they just don’t want to deal with selling at this time. Hopefully, this changes as COVID numbers improve. The other major factor causing low inventory is the amount of new construction. Since the 2008 housing crash, the number of new homes built each year has been below average, we are just now, creeping above average. According to the Wisconsin Builders Association, in 2003 and 2004 at the peak of construction we were seeing 2,800+ new houses in Dane County, for the last 13 years we have averaged 1,055 new homes (we should be around 1,500 homes per year). This 13 year stretch of reduced construction is now catching up to us. Additionally, builders are being extremely cautious due to rising prices in construction materials and labor which is driving the cost of building a home up.
For inventory to balance out, we need more owners to move up in house, and more builders to build. I think inventory will loosen a bit as our COVID world returns to normal, but I think It is still going to be a few years until things return to a neutral market.