Is the area where you practice real estate experiencing a housing shortage?

  • Yes, severely (74%, 64 Votes)
  • Yes, but it is minor (18%, 16 Votes)
  • No, housing meets demand (8%, 7 Votes)

Total Voters: 87

Since the trials of 2020-2021, housing inventory has been at record lows — occurring on top of California’s existing long-term inventory shortage.

As it is, the multiple listing service (MLS) inventory in 2022 remains at historic lows as new construction remains insufficient to keep up with homebuyer demand.

Today’s severe supply-and-demand imbalance will not be fixed overnight, as construction takes time. Just how long will it take for inventory to return to a healthy level?

Inventory will reach pre-pandemic levels around 2023-2024, according to a Zillow panel of experts. Nationwide, total for-sale inventory was at a monthly average of 1.6 million housing units on the market from 2018 to 2019, dropping to a monthly average of just over 1 million in 2021. These monthly figures continue to be lower in 2022, but will rise slowly.

When do experts expect to see inventory return to 1.5 million units or more, or at least something resembling pre-pandemic levels? The expectations include:

  • 38% who say 2024 will see the return of inventory;
  • 37% who say 2023;
  • 12% who say 2025; and
  • 6% who say 2026.

Inventory will begin to climb in 2022 as buyer enthusiasm subsides in the face of rising mortgage interest rates. But today’s lack of inventory is so prolific that a balanced level will not occur for a few years yet.

The cure for the inventory shortage is more construction

As the economic recovery from the 2020 recession progresses, California’s long-term inventory shortage has two potential solutions, including:

This likeliest path forward will be a combination of these two factors, with decreased demand and rising construction working together to produce a healthy level of inventory.

Complicating matters are the high home prices and steep competition which prevent homeowners from listing in fear of the inability to find replacement housing. As long as inventory remains low, this anti-listing activity continues — a vicious cycle.

The solution comes down to increased residential construction. The inventory shortage is sure to continue as long as construction fails to meet demand.

California legislators are in a place where they need to reform zoning codes to allow for more residential development.  As it is, many local zoning codes are outdated. With communication and aid, legislators may work with builders to find a way to increase new construction and reign in rent increases.

For example, one bill currently making its way through the various stages of becoming law, AB 2430, will require local government agencies to consider moveable tiny homes under the same permitting requirements, fees and limitations as accessory dwelling units (ADUs). This is just one of many pro-low-tier-housing bills introduced — with many having passed — in recent years.

Stay up to date on this bill and all the latest legislative efforts to increase home inventory at our Legislative Gossip page.

To get into contact with your local representatives, please visit the United States House of Representatives website.