Inventory Is Up. Where Are All the Homebuyers?

The U.S. housing market has, for the past few years, been characterized by a particular problem: too few homes have been put up for sale, resulting in high prices. Now that we’re five years out from the tumultuous pandemic market, changes are again afoot. According to NPR, home inventory is rebounding—albeit slowly—up 20 percent across the nation; ResiClub reports that in southern states like North Carolina, Georgia, and Virginia, as well as western states like Colorado, Nevada, and California, inventory has grown as much as 51 percent. Some of those states have even recouped their pandemic inventory losses as well.

But surprisingly, despite this inventory bump, buyers aren’t biting. Per NPR, May 2025 home sales were the lowest they’ve been since 2009, continuing a sluggish April sales report from the Wall Street Journal. Demand for homes on the market is thin, resulting in what Zillow considers a "neutral" market—one that favors neither buyers nor sellers—counter to the typical spring and summertime peaks in sales. Some, however, might consider the market "frozen": Higher home prices and interest rates make it harder to enter the market, and with more existential anxieties about the state of the economy, any possible excitement for an inventory bump comes wrapped in a wet blanket. What will it take to get homebuyers back and ready to invest?

Understanding demand is not necessarily a straightforward task when it comes to buying a home. Alexander Hermann, a senior research associate at the Harvard Joint Center for Housing Studies (JCHS) describes several factors that fuel both ability and desire to buy a home. Unlike most goods, creating more supply doesn’t necessarily lower housing costs for average homebuyers. NPR notes that the average home price is up 52 percent compared to 2019, while interest rates have continued to hover between six-and-a-half and seven percent. Some of the higher inventory we’re seeing today, says Hermann, simply comes from homes that are sitting on the market longer than they might have when interest rates were lower.

"In places where you haven’t seen a ton of home construction, what’s happening is homes that go on the market stay on the market for longer, as opposed to a surge in new listings," he says. It’s causing home prices to fall even in places like San Francisco, where there hasn’t been a boom in new single-family construction, as well as Sun Belt cities where increased inventory is bolstered by new construction. None of this, however, is bringing down interest rates, which Hermann says provides an incentive for homeowners to list their homes, and for potential buyers to take the plunge. Affordability, and an ability to generate demand, means more than just a home’s sticker price.

The complexities of demand are detailed in the JCHS’s annual report, "The State of the Nation’s Housing," which was released this week. Per the report, a potential homebuyer would need to make $126,700 to pay for an average home mortgage; in 2021, the same buyer needed to earn $79,300. Only six million of our nation’s 46 million renters can make that payment. "It creates a disincentive to move, especially when interest rates are significantly higher today," says Hermann. Adding in closing costs and down payments, he continues, "you see an increasing reliance on family and friends to be able to cobble together the kinds of resources you need to afford that down payment." For some, Realtor.com notes, the stock market’s fluctuations during the spring tariff announcements and rollbacks may have impacted personal funds that could have been used toward homebuying.

The tariffs, however, have also shaken consumer confidence, or the measurable level of optimism that individuals have about their own finances and the economy at large. Today that confidence is low, says Hermann. "It makes people more reluctant to purchase a home, to put their home on the market, or make changes that could be influential or important for housing demand like switching a job or moving to a place that they would like to move otherwise, just out of fear of broader economic conditions." A 2024 study from Carleton University shows that consumer confidence’s psychological factors impact new household formations—the decision to move out of a parent’s house or depart from a roommate—which in turn influences demand. When confidence is low, we’re less likely to invest in a home. According to the JCHS report, new households under age 45 increased by 690,000 per year between 2019 and 2023. Last year, they decreased to 490,000.

While a construction boom might lower prices and grow civic morale, special credit programs can provide a type of contingency backbone to the homebuying process, producing stability and confidence even when the market is tight. Hermann says we need programs to provide down payment assistance, but also those that can provide interest rate relief through buydowns. "That’s especially important when you think about the continued divergences in homeownership access you’ve seen in the country," he states. Special programs can close racial gaps in homeownership that Hermann says have gone basically unchanged for 30 years; they can address the need for weatherization as climate change threatens to increase maintenance costs.

These programs only become more essential as income inequality grows and administrative priorities shift; funds devoted to assistance get stretched. "If you have a limited amount of money that goes to those kinds of programs, you’re able to help fewer people when the market is not functioning properly and homebuying costs are so high," Hermann adds. So while we see inventory climb and fewer buyers equipped to meet the moment, unfreezing our market and bringing back homebuying optimism might look less like an invisible hand, and more like stronger federal, state, and local investments in getting potential buyers back in the game. 

Top photo by Jeffrey Greenberg/Universal Images Group via Getty Images.

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