More Homes for Sale Isnt a Warning Sign It's Your Buying Opportunity

Maybe youve heard the number of homes for sale has reached a recent high. And it might make you question if this is the start of another housing market crash.

But the reality is, the data proves thats just not the case. In most areas, more inventory isnt bad news. Its actually a sign of the market returning to a more stable, healthy place.

Whats Going on With Inventory?

Based on the latest data from Realtor.com, inventory just hit its highest point since 2020, shown with the white line in the graph below.

But what you need to realize is, at the same time, inventory levels still havent returned to pre-pandemic norms (shown in gray):

That means there are more homes for sale now than there have been in quite some time.

And while its true inventory is up significantly compared to where it was over the last few years, the number of homes on the market is still well below typical levels. And thats important context.

Why This Isnt the Problem A Lot of People Think It Is

Some people hear inventorys rising and immediately think about 2008. Because back then, inventory spiked just before the market crashed. But todays situation is very different.

Heres the key reason why. We dont have a surplus of homes; we have a deficit to climb out of. What were dealing with is a long-term housing shortage and its a big one.

The red bars in the graph below show all the years where housing starts (new builds) didnt keep up with household formation, going all the way back to 2012. The deeper the bars in the graph, the more the housing deficit grew (see graph below):

And one of the reasons this housing shortage kept growing is because new home construction just didnt keep up with the number of people who need to buy homes. In fact, the U.S. is actually short millions of homes at this point, and it will take years to overcome that gap. Realtor.com says:

At a 2024 rate of construction relative to household formations and pent-up demand, it would take 7.5 years to close the housing gap.

That means, in most areas, there isnt a risk of having too many houses on the market right now. Its quite the opposite a vast majority of markets actually need more homes.

Which is why, even though inventory is rising, its not a problem on a national scale. Its just helping to fill a gap thats been growing for years.

Bottom Line

Dont let the headlines scare you. Rising inventory isnt a sign of a crash. Its a step toward a more normal, stable housing market.