The Real Estate Housing Market Is Shifting: Too Many Homes, Not Enough Buyers

As mortgage rates surged, prospective homeowners were priced out. Now there are not enough buyers for an increasing number of homes.By Madeline Garfinkle August 10, 2022

The housing market is shifting, and faster than builders and sellers can adapt.

During the pandemic, low mortgage rates and increased demand led to a surge in the housing market, causing prices to soar and competition to rise. However, the tight market led to sky-high prices and an eventual rise in mortgage rates, which ultimately priced out millions of would-be buyers. Now, builders are faced with an excess of unsold homes, Bloomberg reported.

The once nationwide housing shortage — coupled with the boom brought on by the pandemic — pushed the market to a pressure point. Home prices rose by 20.6% year-over-year in March of 2022, marking the largest increase in the 30 years of record-keeping, according to the Joint Center for Housing Studies tabulations of CoStar and CoreLogic Case-Shiller Home Price Indices data.

However, by early July, the supply of homes versus demand had plunged to the lowest level since 2012, according to a survey from the National Association of Home Builders. Now builders and sellers are scrambling to adjust to the dramatic market shift as buyers back out of contracts in record numbers.

“It has become a very competitive market for builders where they are trying to offload any standing inventory,” Ali Wolf, chief economist for Zonda, told Bloomberg. “We may see a period where supply may actually exceed demand for a while in some of the markets that were the most feverish over the past two years.”