Why are there no houses for sale (affordable ones)?

In the U.S. housing market, potential home buyers are encountering a significant issue: a shortage of available homes for sale. But, why are there no houses for sale? Today, there are only a few affordable houses available on the market. This shortage has been ongoing since the recovery from the Great Recession. And, it’s partly due to investors buying up properties and more elderly Americans choosing to stay in their homes. However, there are some other reasons too. Here, we will explore all of them in detail. And, what the future holds for those looking to either buy or sell a house. 

What should be the ideal inventory ratio?

A normal amount of inventory in the real estate market is about 5 to 6 months of housing supply. This is thought to keep the market balanced, without favoring either buyers or sellers too much. 

Unfortunately, as of August 2023, the National Association of Realtors (NAR) data showed a 3.3-month housing supply level, which might be better than the record low of 1.6 months but is still below balance.

The issue is becoming more complex day by day as popular housing markets are attracting new residents faster than they can build new homes. Experts believe that cities such as San Francisco and Boston are struggling. In July, for example, only one new single-family housing unit permit was issued for every 21 new jobs in these areas as per the NAR data.

The culprits are an increase in costs for materials, problems with the supply chain, and not enough workers. All these issues, coupled with the after-effects of the COVID-19 pandemic, have made the housing shortage worse. 

If you remember, this problem was around even before the pandemic. The U.S. hasn’t been building enough homes to keep up with the growing number of people who need them. This is especially true for millennials, who are now in their prime years for buying homes.

What is the effect of the shortage on potential buyers and sellers? 

Some housing markets are particularly challenging. In markets where new construction is limited, the number of homes available for sale is at or near record lows. 

Both buyers and sellers are affected by the shortage of housing inventory. Buyers feel the impact more. The shortage of available homes is making the process of house hunting more difficult and emotionally taxing than usual. 

With fewer homes available, the market becomes highly competitive. This invariably leads to bidding wars and higher housing prices. 

Buyers are getting limited options. And this is forcing them to decide between paying a high home price for what’s available or waiting, possibly for a long time. 

Many potential sellers can’t afford to list their homes because they can’t buy a new one at current mortgage rates. This means homeowners who want to downsize or move are holding off, keeping their homes off the market. Buyers often have less negotiating power and fewer protections in transactions, as sellers can choose from multiple offers, sometimes with buyers willing to waive contingencies or accept less favorable terms.

Why are there no houses for sale – especially the affordable ones?

There are several reasons for this housing shortage in the United States. 

Economic conditions

One big reason for the low inventory across the country is that lots of homeowners got record low interest rates set by the Federal Reserve in 2020 and 2021. But since then, mortgage rates have shot up. For instance, the rate for a 30-year fixed mortgage hit 6.7% in March. This is almost double of what it was a year ago, according to Freddie Mac. This makes homeowners who have those low rates hesitant to sell and buy another home with a much higher mortgage rate.

Read more: How much money do you need to buy a house?

Low housing inventory

Many cities have limited available land for new construction, resulting in a lack of new housing developments. The U.S. now heavily relies on new construction to replenish housing inventory. Currently, one in three homes for sale is new construction, compared to one in four in 2021. Additionally, rising construction costs, including materials and labor, make it challenging to build affordable housing units.

There is no doubt that real estate markets with recent significant construction activity, such as Austin, Nashville, and Dallas, have more available homes. And, have more stabilized house prices. 

Rapid population growth

Affordable cities are becoming crowded as people are getting priced out of expensive places such as New York City. As a result, they are moving to smaller cities to buy homes. According to real estate agents, there’s been a noticeable increase in buyers relocating from New York, New Jersey, and even California to smaller cities. 

This is leading to fewer houses available for sale. Cities with the lowest inventory include Rochester (N.Y.), Buffalo (N.Y.), Allentown (Penn), Greensboro (N.C.), Hartford (Boston), and Montgomery County (Penn).

An influx of property investors

Another contributing factor to low inventory is the rise in investors purchasing properties, including single-family homes, to rent out. In 2021, investors bought 24% of all single-family homes, a significant increase from the approximately 15-16% annually seen since 2012, according to a real estate analysis. This means fewer homes are left for regular people to buy.

What does the future hold for buyers and sellers?

The housing shortage is likely to continue for a while due to its complexity. While lower interest rates might offer some relief, they won’t fix the problem entirely. Increasing the number of new homes built could help. However, challenges such as high materials costs and labor shortages remain. This may deter builders from starting new development projects. Therefore, it might take a long time for the U.S. to bounce back from the current housing shortage.

Key takeaways

The housing shortage boils down to not having enough homes for the number of people who want to buy them. Factors such as the pandemic, inflation, and higher interest rates have all played a role in making the shortage worse.

Since the Great Recession, there hasn’t been enough new home construction, and this hasn’t changed much. And, there’s still not enough supply to meet the demand.

This shortage affects the real estate market as a whole, and it seems to be a complicated problem without a clear solution.

Written by Ramona Sinha. February 11, 2025

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.