Anyone who knows me will tell you that I have been talking about inventory challenges for years. Many markets across the country have experienced severe shortages of inventory caused by reduced new construction building. This has resulted in dramatically increased house prices.
Don’t forget that the real estate market is just like the stock market in that prices change based on supply and demand. Markets across the country that have experienced inventory shortages have been also experiencing sharp price increases.
So, how do you know when the inventory shortages will ever end? You have buyers that need houses and the lack of inventory has been wreaking havoc among motivated buyers. There just isn’t enough inventory to go around and there must be some light at the end of the inventory shortage tunnel. That light comes in the form of increased inventory and there is a very easy way to figure out how much new inventory might be coming on the market and when it may happen.
In order to predict when the inventory might be coming on the market you have to track permits.
Permits are the most accurate indicator of how many new homes will be added to the market. The U.S. Census Bureau and the U.S. Department of Housing and Urban Development put together a fantastic joint report that makes tracking new permits very easy.
A good sign of inventory increases to come are when the permit numbers increase year over year. For example, permits were up nationally 18.5% from July 2016 to July 2017. Even though a large percentage of those permits were in the five or more units category, any increase in housing inventory releases the pressure on inventory. Single family permits were up 7.7% over August 2016.
This increase in inventory means that there is some inventory hope for buyers in the future. This slight increase in inventory will allow buyers more options and will reduce the pressure on prices.
Even though the permit numbers are not where they need to be to even out our inventory shy market this is a step in the right direction.
Keep an eye on permits and you will be able to see the light at the end of the tunnel.
Want to see the permit numbers from the Census Bureau? Follow the links below and take a peek!