Why is it so difficult to locate a home to purchase this year, especially in high-demand areas like the seacoast of New Hampshire and Maine? The fact is that we’re in what’s known as a seller’s market, which makes real estate extremely competitive for buyers right now. The number of people looking for a house greatly outnumbers the number of houses available.
Despite the fact that low housing inventory is nothing new, it’s a problem that grows worse with time. Here’s a look at two reasons why today’s housing supply is limited, as well as what it means for you.
1. For many years, new home construction has lagged behind.
The graph below depicts new single-family home construction over the past five decades, including the long-term average for housing units completed. During the housing bubble, builders surpassed that normal (in red on the graph). As a consequence, there was an overabundance of properties on the market, causing house values to drop. This was one of
Since then, new home construction has dropped significantly. For the past 13 years, builders haven’t been able to produce enough homes to match the typical (as shown in green on the graph). That underproduction left us with a multi-year inventory gap going into the epidemic.
2. The Economic Impacts of the Pandemic
Then, when the epidemic hit, it provided a fresh perspective on home and a new appreciation for its significance. The value of having a secure place to live, work, school, and exercise became even more significant for people all across the nation. As mortgage rates fell to below 3%, buyers flooded the market searching for a house that would fit their changing needs at bargain prices. Simultaneously, sellers were hesitant to put their homes on the market because concerns about the epidemic increased.
As a result, home values continued to plummet. Value dropped even more. According to realtor.com, “Last month, the number of homes for sale fell 26.8% versus a year earlier, with about 177,000 fewer houses advertised in what’s usually a slower month due to the holidays and colder weather. . . .”
What Does This Mean for You?
Low inventory may be a struggle for a buyer. You want to find the house of your dreams, and you don’t want to compromise. What if there aren’t that many houses to select from?
There is some good news. According to experts, more houses will become available soon as sellers return to the market. While this optimism comes from Danielle Hale, Chief Economist at realtor.com, he adds a note of caution:
“We expect that the epidemic will begin to abate in 2022, and inventory levels will stabilize. . . But that implies we’ll be dealing with half of what we had before the pandemic. The market is likely to continue to move at a fast pace for buyers. If you see a house you like, you want to act quickly.
Simply said, inventory is still low, even though new homes are being built. But don’t let your strategy go by the wayside because more houses are expected to hit the market soon. Instead, keep searching and persevering in spite of today’s limited supply. If you’re patient and dedicated, you can locate your next home.
Make a list of reasons why finding a home is so vital. Those things should be your driving force behind your search. Make sure your agent understands them and that you are clear on your priorities. As you wend your way through today’s limited housing inventory in order to discover the ideal house for you, having a reliable advisor at hand
Bottom Line
Even if inventory rises, it’s still lower than usual. Give me a call at 818-305-5693 to find out more about what’s going on in your neighborhood, which houses are for sale, and why it’s still important to prioritize your home search now.