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There’s a reason homebuyers have had such a hard time navigating the housing market this year: Home inventories have plummeted, resulting in a host of adverse conditions, from super-high listing prices to bidding wars.

There were just 1.16 million unsold homes on the market in May, according to the National Association of Realtors. This equates to a 2.6-month supply at the current monthly sales rate. But it generally takes at least four months of supply to create a balanced housing market, so as long as supply doesn’t pick up, sellers will still have an edge.

But in the second half of 2022, the number of offers of houses may increase. And if that happens, buyers will benefit in many ways.

A house with a for sale sign in front of it.

Image Source: Getty Images.

Recession fears may motivate sellers

For months, financial experts have been warning that a recession is imminent. The Federal Reserve is raising rates substantially to slow inflation. But this could lead to a sharp decline in consumer spending, which in turn could trigger an economic downturn.

As soon as the economic situation worsens, the unemployment rate could rise sharply, putting home buying off the agenda for more people. This is not a scenario that would favor sellers. And a lot of people may be looking to get ahead of this by listing their homes as early as possible rather than later while consumer demand is still strong.

Rising mortgage rates could push buyers away

Historically, today’s mortgage rates are by no means as bad as they can be. But rates have risen sharply since the start of the year and are now at their highest level in more than a decade. To make matters worse, they may continue to rise over the next year.

But a combination of sky-high home prices and high mortgage rates may be enough to drive buyers out of the market. Once this happens, the gap between supply and demand for housing will narrow and sellers will lose their edge. And so some sellers may decide to act quickly and list their homes for sale this year before mortgage rates scare away more buyers.

Potential light at the end of the tunnel

For months, both homebuyers and real estate investors have struggled with low housing stock. But economic and mortgage-related concerns could prompt sellers to list more homes for sale in the second half of 2022. If that happens, home prices should start to decline, giving buyers much-needed relief given where home prices have stayed in the past. year.

Plus, extra inventory can make the process of buying a home a lot less stressful. When housing supply is plentiful, buyers don’t have to constantly engage in bidding wars, which are notoriously torturous. And there’s something to be said for having more options when it comes to finding specific home features or layouts.

Of course not guarantee that the housing inventory will increase substantially over the next few months. But based on these factors, there is reason to believe that it is possible.

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