In his latest video, real estate expert Michael Bordenaro explores how the U.S. housing market appears to be at a critical juncture as it grapples with a surge in housing inventory, signaling a potential correction.
In December 2023, the market saw a staggering addition of 33,251 listings, challenging the narrative of perpetual low inventory that has fueled fears of an unattainable dream of homeownership.
The Unprecedented Surge in Inventory
Contrary to the typical year-end trend of declining inventory due to holiday-related market slowdowns, December 2023 witnessed an unprecedented surge.
According to data from realtor.com, there were 33,258 more new listings compared to the same period in 2022. This surge, occurring during a time when inventory traditionally shrinks, hints at a shift in market dynamics.
Housing market analyst Michael Bordenaro emphasizes that labeling this phenomenon a crash is premature. He acknowledges the sensitivity around the term but argues that what unfolds is the beginning of a correction.
This correction, he argues, is a return to a more normalized market, challenging the narrative of perpetual low inventory that has fueled housing market FOMO (fear of missing out).
The Impact on Home Prices
As inventory surges, the dynamics of supply and demand are undergoing a transformation. According to realtor.com’s report, the median sale price grew by 1.2% year-over-year in December.
However, Bordenaro cautions that when adjusted for inflation, this growth is negligible, signaling a potential flattening of home prices.
Analyzing the regional breakdown of inventory growth, it becomes apparent that the southern U.S. is experiencing a substantial uptick, with a 7.7% growth in inventory.
In contrast, the Midwest saw a marginal increase of 0.2%, and the Northeast witnessed an 8% decline in listings. Bordenaro attributes varying market dynamics to regional disparities, emphasizing that the situation may not be uniform across the country.
YouTube commenters joined the discussion with some added info: “I am a licensed loan officer in AZ and I am adding PA. My client and I looked at some houses today on zillow. One house was listed for $399k. The property was originally listed in March 2023 for 649k. Approximately a 45% decrease in less than one year. Another property listed three months ago has been cut by 30k. Both properties are not under contract. I’ve asked my client to wait until the end of the first quarter but he wants to jump. I believe they were air bnb’s on an investor owned them after analyzing the price history.”
Some are extremely worried about the future: “The only things that I am seeing are massive layoffs. I am staying away from this housing market and praying that I can keep my job.”
Others have some advice for everyone: “Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold.”
How to Navigate the Uncertainty
As the housing market grapples with shifting dynamics, it is crucial for stakeholders, from policymakers to prospective homeowners, to navigate the uncertainty.
The surge in housing inventory signals the need for a cautious approach, considering the potential ripple effects on prices, buyer behavior, and broader economic indicators.
Whether this surge is a temporary anomaly or the beginning of a prolonged correction remains to be seen, but it undoubtedly demands attention and thoughtful consideration from all involved parties.
What do you think of this? How might the surge in housing inventory impact the aspirations of potential homebuyers, especially those who have been discouraged by the narrative of perpetually low inventory?
In light of regional disparities in inventory growth, how can local markets leverage this shift to address specific challenges unique to their areas? As the market corrects, how can policymakers strike a balance between supporting affordable homeownership and maintaining market stability?