Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand

Appfolio Websites • August 31, 2021

Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand



One of the major questions real estate experts are asking today is whether prospective homebuyers still believe purchasing a home makes sense. Some claim rapidly rising home prices are impacting demand and, by extension, leading to the recent slowdown in sales activity.

However, demand isn’t the real issue. Instead, it’s the lack of supply (homes available for sale). An article from the Wall Street Journal shows this is true for new home construction:

“Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up.”

The article quotes David Auld, CEO of D.R. Horton Inc. (the largest homebuilder by volume in the United States since 2002), explaining how they don’t have enough homes for the number of buyers coming into their models:

“Through our history, to have somebody walk into our models and to tell them, ‘We don’t have a house for you to buy today’, is something that is foreign to us.”

Danielle Hale, Chief Economist for realtor.com, also explains that, in the existing home sale market, the slowdown in sales was a supply challenge, not a lack of demand. Responding to a recent uptick in listings coming to market, she notes:

“. . . if these changing inventory dynamics continue, we could see a wave of real estate activity heading into the latter part of the year.”

Again, the buyers are there. We just need houses to sell to them.

If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate – but this isn’t the case. As Mark Fleming, Chief Economist for First American, explains:

“There’s a lot of conversation around rising prices and falling quantity in the housing market, and there’s this concept, or this idea, that it's a demand-side problem . . . . But, if demand were falling dramatically, we would actually see less price pressure, less home price growth.”

Instead, we’re seeing price appreciation accelerate throughout this year, as evidenced by the year-over-year percentage increases reported by CoreLogic:

  • January: 10%
  • February: 10.4%
  • March: 11.3%
  • April: 13%
  • May: 15.4%
  • June: 17.2%

(July numbers are not yet available)

There’s a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.

1. Affordability isn’t the challenge some are claiming it to be.

Though home prices have risen dramatically over the last 18 months, mortgage rates remain near historic lows. Because of these near-record rates, monthly mortgage payments are affordable for most buyers.

While homes are less affordable than they were last year, when we adjust for inflation, we can see they’re also more affordable than they were in the 1970s, 1980s, 1990s, and much of the 2000s.

2. Owning is a better long-term decision than renting.

A recent study shows renting a home takes up a higher percentage of a household’s income than owning one. According to the analysis, here’s the percentage of income homebuyers and renters should expect to pay now versus at the end of the year.While the principal and interest of a monthly mortgage payment remain the same over the lifetime of the loan, rents increase almost every year.

3. Owners build their wealth. Renters build their landlord’s wealth.

Whether you’re a homeowner or an investor, real estate builds wealth through growing equity year-over-year. If you own, your household is gaining the benefit of that wealth accumulation. Fleming says:

“The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation . . . . We have to take into account the fact that the shelter that you’re owning is an equity-generating or wealth-generating asset.”

Odeta Kushi, Deputy Chief Economist at First American, elaborates in a recent article:

“. . . once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets, including the two most expensive rental markets, San Francisco and San Jose, Calif.”

Today, that equity buildup is substantial. The National Association of Realtors (NAR) reports:

“The median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter of 2021 compared to one year ago, with double-digit price gains in 94% of markets.”

In 94% of markets, there was a greater than 10% increase in median price. That means if you bought a $400,000 home in one of those markets, your net worth increased by at least $40,000. If you rented, the landlord was the recipient of the wealth increase.

Bottom Line

For many reasons, housing demand is still extremely strong. What we need is more supply (house listings) to meet that demand.


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Condos Could Be a Win for Today’s Buyers

By KCM • August 29, 2025
Condos Could Be a Win for Today’s Buyers Not every homebuyer wants the biggest house on the block. Some want something simpler, more affordable, and easier to maintain, especially in a market where every dollar counts. That’s where condos come in. For first-time buyers, they can be a smart way to get into homeownership without stretching your budget. For downsizers, they offer less space to maintain with the flexibility to stay in a great location. And right now, condos are one of the most buyer-friendly parts of the market. Condo Inventory Is Up, And That Means More Choice According to the National Association of Realtors (NAR), there are 194,000 condos for sale right now. That’s the second highest amount we’ve seen in the last three years (see graph below): Just remember, this is the national figure. The exact number is going to vary based on where you’re looking to buy. But, generally speaking, you have more options and less competition. You’re not stuck waiting for something to pop up or rushing into an offer just to beat someone else to it. You’ve got plenty to choose from. And if you’re particular about layout, location, or amenities, this is your chance to be selective. That’s a big shift from the market frenzy of just a few years ago. Compared to early 2022, we’ve got nearly double the condos available now. That gives you more breathing room to find the right fit. Prices Are Cooling, and Buyers Hold More Negotiating Power And since there are more for sale, many sellers are more open to negotiating right now. So, you may be able to get a better price. As Redfin explains: “. . . condo buyers in many cities may be able to find sellers who are willing to give concessions and/or sell for less than their asking price.” Condo prices are starting to ease in many markets. According to Intercontinental Exchange (ICE), condo prices dipped 1.3% in June compared to last year. And over half of the top 100 U.S. metros saw condo prices drop slightly year-over-year. Data from Redfin shows what the recent dip in prices looks like (see graph below): That doesn’t just help with affordability, it also shifts the power dynamic. Condo buyers in many markets are now in a position to negotiate on price and ask for concessions, like help with closing costs. Bottom Line Condos aren’t just a fallback option. In today’s market, they’re one of the most strategic ways to buy. With more options, softening prices, and more room to negotiate, now could be the right time to make your move. Could a condo check more boxes than you expected? Let’s talk through your options and find out.

More Contracts Are Falling Through. Here’s How To Get Ahead.

By KCM • August 23, 2025
More Contracts Are Falling Through. Here’s How To Get Ahead. When you sell a house , the last thing you want is for the deal to fall apart right before closing. But according to the latest data from Redfin, that’s happening a bit more often lately. The good news is, it’s completely avoidable if you lean on an agent for insight into why that is and how to avoid it happening to you. This June, 15% of pending home sales fell through . That means those buyers backed out of their contracts. That’s not too much higher than the norm of roughly 12% from 2017-2019, but it’s still an increase. And it’s one you don’t want to have to deal with. The key to avoiding this headache is knowing what’s causing the issues that lead to a buyer walking away. A recent survey from John Burns Research and Consulting (JBREC) and Keeping Current Matters (KCM) finds that agents reported the #1 reason deals are falling apart today is stemming from the home inspection (see graph below): Here’s why. With high prices and mortgage rates stretching buyers’ budgets, they don’t have a lot of room (or appetite) for unexpected repairs. Not to mention, buyers have more options to choose from now that there are more homes on the market. So, if the inspection turns up a major issue, they may opt to walk away. Afterall, there are plenty of other homes they could buy instead. Or, if the seller isn’t willing to tackle repairs , a buyer may back out because they don’t want the expense (and the hassle) of dealing with those issues themselves. The good news is, there’s a way you can get ahead of any unpleasant surprises as a seller, and that’s getting a pre-listing inspection. It’s not required, but the National Association of Realtors (NAR) explains why it’s helpful right now: “To keep deals from unraveling . . . it allows a seller the opportunity to address any repairs before the For Sale sign even goes up. It also can help avoid surprises like a costly plumbing problem, a failing roof or an outdated electrical panel that could cause financially stretched buyers to bolt before closing .” What’s a Pre-Listing Inspection? It's exactly what it sounds like: a professional home inspection you schedule before your home hits the market. Here’s what it can do for you: Give you time to fix what matters . You’ll know what issues could come up in the buyer’s inspection. So, you’ll have time to take care of them before anyone even walks through the door. Avoid last-minute renegotiations . When buyers uncover unexpected issues after you’re under contract, it opens the door for concessions you may have to make like price drops or repairs, or worse, a canceled deal. A pre-listing inspection helps you stay ahead of those things before they become deal breakers. Show buyers you’re serious . When your home is clean, well-maintained, and already vetted, buyers see that. It builds trust and can help you sell faster with fewer back-and-forth negotiations. The bottom line? A few hundred dollars upfront can save you thousands later. Should Every Seller Do This? Not necessarily. Your real estate agent can help you decide what makes the most sense for your situation, your house, and your market. If you decide to move forward with a pre-listing inspection, your agent will guide you every step of the way. They’ll: Advise on whether to fix or disclose each issue Help you prioritize repairs based on what buyers in your area care about Make sure you understand your local disclosure laws Bottom Line If you want to avoid potential snags in your deal, a pre-listing inspection could be the way to go. Let’s talk about whether a pre-listing inspection is the right move for your house and market. Would you rather find out about a major repair now, when you can handle it on your terms – or after you’re under contract, when the clock is ticking?

Is It Better To Buy Now or Wait for Lower Mortgage Rates? Here’s the Tradeoff

By KCM • August 22, 2025
Is It Better To Buy Now or Wait for Lower Mortgage Rates? Here’s the Tradeoff Mortgage rates are still a hot topic – and for good reason. After the most recent jobs report came out weaker than expected, the bond market reacted almost instantly. And, as a result, in early August mortgage rates dropped to their lowest point so far this year ( 6.55% ). While that may not sound like a big deal, pretty much every buyer has been waiting for rates to fall. And even a seemingly small drop like this reignites the hope we’re finally going to see rates trending down. But what’s realistic to expect? According to the latest forecasts , rates aren’t expected to fall dramatically anytime soon. Most experts project they’ll stay somewhere in the mid-to-low 6% range through 2026 (see graph below): In other words, no big changes are expected. But small shifts, like the one we just saw, are still likely. Each time there’s changing economic news, there’s a chance mortgage rates will react. And with so many reports coming out this week, we’ll get a better feeling of where the economy and inflation are headed – and how rates will respond. What Rate Would Get Buyers Moving Again? The magic number most buyers seem to be watching for is 6%. And it’s not just a psychological benchmark; it has real impact. A recent report from the National Association of Realtors (NAR) says if rates reach 6%: 5.5 million more households could afford the median-priced home And roughly 550,000 people would buy a home within 12 to 18 months That’s a lot of pent-up demand just waiting for the green light. And if you look back at the graph above, you’ll see Fannie Mae thinks we’ll hit that threshold next year. That raises an important question: Does it really make sense to wait for lower rates? Because here’s the tradeoff. If you’re waiting for 6%, you need to realize a lot of other people are too. And when rates do continue to inch down and more buyers jump into the market all at once, you could face more competition, fewer choices, and higher home prices. NAR explains it like this: "Home buyers wishing for lower mortgage interest rates may eventually get their wish, but for now, they’ll have to decide whether it’s better to wait or jump into the market." Consider the unique window that exists right now: Inventory is up = more choices Price growth has slowed down = more realistic pricing You may have more room to negotiate = you could get a better deal These are all opportunities that will go away if rates fall and demand surges. That’s why NAR says : "Buyers who are holding out for lower mortgage rates may be missing a key opening in the market." Bottom Line Rates aren't expected to hit 6% this year. But when they do, you’ll have to deal with more competition as other buyers jump back in. If you want less pressure and more negotiating power, that opportunity is already here – and it might not last for long. It all depends on what happens in the economy next. Let’s talk about what’s happening in our area and whether it makes sense to make your move now, before everyone else does.
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