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What an Inventory Increase Means for Buyers and Sellers

Photo: Laura Brophy Interiors
Photo: Laura Brophy Interiors

Over the past few years, a combination of various factors has created a perfect storm of too many hopeful buyers and not enough homes on the market.

These include outsized pandemic-era demand, high interest rates, supply and labor shortages in the new construction sector, and the large baby boomer demographic choosing to “age in place.” The good news, however, is that much of this looks to change in the months ahead. With interest rates predicted to trend downward, enticing more homeowners to sell, while the number of new builds increases, inventory levels may finally be on the rise again. Whether you’re considering buying a home this year or listing your current one, here’s how you may benefit from a more robust home inventory.

Couple talking with advisor

What an inventory increase means for buyers

When inventory is tight, the market often swings in the seller’s favor, putting buyers at a disadvantage in a number of ways. For one, they may end up being forced to make compromises on their wants and needs regarding a home’s design, condition, or location. In addition, a low-inventory market often means that buyers must make decisions quickly to avoid missing out on one of the few available listings in their target neighborhood. And even then, they may not be guaranteed to get it; during a seller’s market, multiple offer scenarios are common, which leaves buyers with very little wiggle room when it comes to asking for contingencies and repairs.

An inventory increase can flip downsides in the opposite direction. With more homes on the market, there is more for buyers to choose from in their favored markets, increasing their chances of finding the home they’re really hoping for. It also means that buyers and their agents can take a bit more time to ensure that the home and the offer are both right without fear of someone else snatching it out from under them. Finally, buyers may have more room to negotiate since they face less risk walking away if needed while the seller may not be confident they can get a better offer. This makes the buyer better able to ask for a lower price, for accommodations on the closing date, or even for sellers help with closing costs.

Interior of house

What an inventory increase means for sellers

Naturally, all the benefits outlined above for buyers may mean greater challenges for sellers, the biggest being the market becoming more competitive. As a result, they may need to adjust their strategies to make sure their homes are attractive and stand out among the pool. For instance, a seller may have to consider whether it’s better to price at their home’s perceived market value and risk subsequent price drops or to price under the competition in the hopes of generating a multiple-offer bidding war.

Staging and presentation also become more important during a saturated market. A home that is clean, well decorated yet depersonalized, and showcases its best features will stick in the minds of potential sellers better than the one presented as is. Likewise, many home issues that might be overlooked when the options are limited become fodder for negotiations when buyers have more to choose from. It may be essential for sellers to conduct even minor repairs as well as install some of the features and finishes that are in demand if they want to elicit a lucrative offer.

As indicated with the impact on buyers, the negotiation process shifts as well for sellers when there is greater available inventory. They must become more flexible, understanding that it’s the buyers who have more leverage. However, this doesn’t mean they can’t remain firm on the home price if they want; there are other ways to sweeten the pot, such as with contingencies, without giving up too much financially.

For buyers and sellers alike, being resilient and flexible in the face of a shifting market is the key to having a smooth transaction. After all, while you can’t control home inventory or its impact, you can control your attitude and, to a certain extent, your timeline for making a move. As you prepare to engage in the process, leverage the expertise of real estate agent, who can help you understand, anticipate, and respond to changing conditions so you can purchase or sell a home with success.

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Kimmer Plunk

Based in Memphis and serving clients in West Tennessee and Northwest Mississippi. Serving others is a reward of its own and part of what makes me happy, and I've been doing that for 30 years through various activities including Girl Scouts, PTO, various board positions, unhoused ministry, and professional, award-winning teaching. I treat others the way that I want to be treated including being readily available, listening to your desires, answering your questions thoroughly, and walking you through the home purchase process. My ultimate goal is to see that you find the home of your dreams and experience the least amount of stress during the process.

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