Will Real Estate Inventory Finally Increase This Spring?

Homeowners may get their properties listed soon for one big reason.

There's a reason so many buyers have struggled to purchase a home over the past year. Inventory has been extremely sluggish, and that's also driven home prices up to unaffordable levels.

As of February, there was a 1.7-month supply of available homes on the market, according to the National Association of Realtors. But that's a low enough supply to give sellers free reign to charge buyers a premium. In fact, it generally takes a four- to six-month supply of homes to create a more equal housing market among buyers and sellers.

Meanwhile, spring tends to be a popular time for new property listings, and with that season in full swing, buyers may be wondering if housing inventory will finally pick up. Last spring, there was no major listing boom. But things could be different this year for one key reason.

Read more: 3 Tips for Buying a Home in Spring of 2022

Sellers want to cash in while they can

Right now, sellers still have the option to command higher prices for their homes. But as mortgage rates continue to rise, that option may disappear.

As it is, mortgage rates are already considerably higher now than they were at the start of 2022. But several factors, including rate hikes on the part of the Federal Reserve, have led to a sharp increase in borrowing rates.

If mortgage rates continue to rise, which could very well happen, then buyer demand could start to wane. And once that happens, sellers will no longer be able to command the high prices they can get away with right now.

That's why we could end up seeing a lot more listings this spring. Sellers may be fully aware that if they wait too long to list their homes, they'll lose out on the chance to profit as nicely as they can right now. That's a risk many won't want to take.

Should you plan to buy a home this spring?

The level of housing inventory might look a lot healthier come spring. But does that mean that it will be a great time to buy? Not necessarily.

Home prices are likely to remain elevated this spring, and mortgage rates are extremely unlikely to drop back down to 2021 levels. As such, if you buy in the near term, you could be looking at a very expensive mortgage to carry.

The reality is that it's going to take a lot more housing inventory for home prices to come down significantly. And while real estate inventory could increase in the coming weeks, it may not happen at a fast enough clip to make buying a home a more affordable prospect.

If you've waited this long to purchase a home, you may want to plan to sit tight a bit longer and see how home prices trend as 2022 moves along. While an uptick in real estate inventory should help drive home prices downward, buyer behavior will also play a role in that trend. And at some point, buyers are apt to start feeling the squeeze of high mortgage rates and home prices.