Why Are Inventory Levels So Low?

Several popular explanations, including investor ownership, price increases, price spreads, home building rates, and the trends of older homeowners, were examined

July 26, 2017
New house being built

While there are a bunch of reasons for the lack of available single family homes across the country, Trulia tested the theories, busted the myths, and identified the biggest factor.

Relative to other factors, weak rates of new home construction is most strongly related to the nation’s inventory levels. As the site explains, across the largest 100 metros, an increase of one percentage point in a market’s housing stock correlated with inventory increases of 13 percent. A slight uptick in housing stock over the last six years, for instance, would lead to 1,000 more homes on the market in Q3 2017.

Investor ownership is also a key factor. Markets with more homes owned and rented out by investors have fewer available homes.

Markets with many homes owned by boomers actually positively correlated with inventory, and home value recovery and price spread did not correlate significantly with inventory.

The silver lining from these results are that homebuilding and investor activity are factors that could be made more attractive through a combination of strategically targeted land use, tax, and financial policies.

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