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Low Inventory Won't Last Forever. Two Reasons to Be Optimistic

April 18 2021

homesnap low inventory optimistic 1By now, you've probably seen the report in the Wall Street Journal that there were more active real agents than homes for sale in January. It's certainly a sobering statistic, and it plainly and succinctly illustrates the unprecedented level of competitiveness facing professionals in today's housing market.

But it's not all doom and gloom.

Yes, a lack of inventory is anxiety-inducing—without a doubt. And yes, you're right to wonder if things will settle down anytime in the near future. But we believe there are two reasons why agents should be optimistic for the coming months.

Reason for Optimism Number One

First, we expect the number of active real estate agents to decrease. Back in September, we wrote about the surge of newly registered agents. We pointed to a depressed job market and rising home values as the two central factors driving soaring interest in a real estate career. At the time, though, we didn't know whether this was a temporary response to a once-in-a-century pandemic or the first warning sign of an industry teetering on oversaturation.

Now, in April, we have some more clarity. As the vaccine rollout continues and the job market bounces back, we believe that the majority of new agents will exit the industry as quickly as they came. Many were likely never as interested in a long-term real estate career so much as they were an alternative income stream, and now, facing one of the roughest-ever markets for rookie agents, the allure of a secure paycheck elsewhere will almost certainly be too strong for many.

Furthermore, we believe the pace of licensed real estate agents exiting the market will far exceed those entering it. Last year, record-setting home prices offered the potential of a quick buck. This year, the sentiment has flipped—and the entire world knows depressed inventory means a new agent is more likely to be eking out a living than striking gold.

Compounded, these two factors should bring market competitiveness back to pre-pandemic levels (or close to it) in the coming few months.

Reason for Optimism Number Two

Lost in the sensationalism of the Wall Street Journal article is the fact that the number of agents outpaced listings in January. It's unusual for that to happen, sure. That's why it made headlines. But is it really as much a cause for concern as it seems?

According to Homesnap internal data, in a typical year, January marks the first time the volume of listings increases after falling from October to December. This year, the rate of growth was about half of last year—but it still reflected the same predictable pattern; listings did trend in a positive direction.

homesnap low inventory optimistic 2

Of course, in 2021, listings flatlined in February compared to January, which is atypical—but not altogether unexplainable. Many would-be sellers have been riding out the winter months, waiting for vaccinations and repealed mandates just around the corner, and the flat trajectory points just as much to the rate at which homes are going under contract as it does to the lack of new properties brought to market.

Wouldn't it be reasonable, then, to predict that we've simply extended the normally depressed winter months into the spring? Aren't we seeing something akin to slightly more busy November and December? Only this time, instead of people waiting for after the holidays to go to market, they're waiting until they're vaccinated?

It's no guarantee, for sure. Inventory may stay sub-normal for the whole year. But would-be sellers can only hold out against record-setting home prices for too long before they're tempted to capitalize. Simple supply and demand, right?

That's reason enough for optimism for us.

To view the original article, visit the Homesnap blog.