Century 21 CEO on rethinking the inventory challenge

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“Once the rates go down, we’ll see more buyers and sellers jumping into the market…” This is what we’ve been hearing for months. Well, rates have dropped, and yet, according to the National Association of Realtors (NAR), home sales in May were still down compared to 2024.

Remember, there are millions of homeowners locked into historically low pandemic-era mortgage rates: According to the Federal Housing Finance Agency, roughly 60 percent of current homeowners enjoy rates below 4 percent. So, we know they’re hesitant to let go.

Meanwhile, first-time buyers eager to purchase their dream home are being faced with prices that continue to rise month after month.  

What’s the biggest factor at the heart of this? Inventory.   

Yes, supply levels are rising slowly, but with a growing population and economic impacts on housing starts, there are just not enough homes on the market today. So, even if more buyers jump in right now, they’re seeing higher competition for fewer properties, which is driving home price increases across markets. 

As an industry, it’s up to us to change how we approach this challenge if we’re going to see any relief in the near future.

What are the headwinds?

We all know that mortgage rates play a significant role. But there is also the building factor. In 2024, industry analysts from Freddie Mac to the National Association of Home Builders (NAHB) estimated that we are currently anywhere from 1.5 to 4 million homes short of meeting current demand.

The U.S. Census reported builders were on pace for an annualized 1.4 million new home starts in 2025. However, this may be impacted by a variety of factors, from local municipality zoning, permitting and land use policies to increasing costs of building materials.

As an industry, we need to support holistic, long-term solutions for inventory challenges that address the zoning and permitting challenges at the state and local level as well as regulatory and tax reforms at the federal level. Elected officials continue to try to find creative solutions to address these challenges. However, while many of these proposals are promising, they are likely years away from being implemented.

Where do agents go from here?

All of this is to say that we should not rely solely on a big jump in new inventory in 2025. As real estate professionals, you need to focus on the things that you can control, like finding new ways to guide clients in overcoming these obstacles. This starts by developing an expertise in alternative housing options that offer buyers a viable first step into homeownership in today’s environment. 

A few ideas to help your clients reimagine today’s market:

• Homeowners can increase living space and property value by adding an accessory dwelling unit (ADU).

States like California have led the way in ADU adoption by removing zoning and permitting barriers. In that state alone, legislative reforms opened the door for over 20,000 ADU permits to be issued in 2023, up from just a few thousand in 2016. According to the Urban Institute, if the U.S. increased its ADU adoption rate from the national average of 1.3 percent to California’s 3 percent, it could add 1.5 million new housing units.

The addition of an ADU to a property can open economic opportunities for multi-generational living as well as create a new source of rental income for homeowners. Consumers need a real estate professional who understands the local market regulations and can advise them on the financing required to undertake this type of addition.  

• We are also seeing a rise in more affordable modular homes, often called prefabricated homes.

Not to be confused with mobile homes, modular homes can be built faster than site-built homes and are often made with sustainability in mind. They also offer buyers the flexibility of building in a variety of sites from suburban to rural and remote locations. 

• Tiny homes continue to be a growing area of the housing industry.

According to HomeAdvisor.com, searches for tiny houses increased 680 percent over the past 10 years. This housing option offers lower priced entry into homeownership for first-time homebuyers as well as economical downsizing options for people in their 50s and 60s. Counseling current homeowners with considerable equity on these newer, less expensive options could be a way to get sellers to consider listing their current properties.

What about affordability?

The lack of inventory is directly related to affordability, thus holding many buyers back from entering the market. This is likely exacerbated in markets that have a lot of competition and bidding wars driving prices even higher. To that end, agents can also bring value to their client’s journey by becoming knowledgeable about affordable alternative markets, perhaps expanding their client’s radius of consideration. 

Affordability is not limited to home prices. Having knowledge of surrounding market property tax rates and even homeowners’ insurance costs can help your clients make an informed decision.

While this may seem counterintuitive — i.e. sending your buyer out of your market — referrals can be a viable source of income. Referral networks can open independent agents’ potential for business in markets across the country and around the world. If you know this is something your client may be open to, you’re bringing unexpected value to the relationship. And on the seller’s side, you’re maximizing their selling potential. 

It’s all about mindset

While many of these approaches are not core to a real estate professional’s traditional method of conducting local business, they are still very much aligned with the service philosophy of being a trusted professional.

We’re facing many changes in the real estate industry today, but many are not new. It’s how you adapt to those changes, and help your clients move forward, that will ultimately set you up for success.

Mike Miedler is President and CEO at Century 21.