The Key To Buying A Home This Year!
There is one question that we've heard repeatedly from homebuyers this year, "Why is it so hard to find a house?" Well, the simple answer is that we're in the ultimate seller's market, which means real estate is super-competitive right now - especially for those looking to buy a home in California. The National Association of Realtors (NAR) reports that homes are getting 4.8 offers per sale, on average, and that number continues to rise. Why? There aren't enough houses for sale.
While low inventory within the housing market isn't anything new, it is becoming more challenging to navigate the ins and outs, which is why teaming up with a knowledgeable Real Estate Agent is more important than ever.
The Chief Economist at realtor.com, Danielle Hale explains:
"The housing market is still relatively under supplied, and buyers can't buy what's not for sale. Relative to what we saw in 2017 to 2019, March 2021 was still roughly 117,000 new listings lower, adding to the pre-existing early-year gap of more than 200,000 fresh listings that would typically have come to market in January or February. Despite this week's gain from a year ago, we're 19 percent below the new seller activity that we saw in the same week in 2019."
The Covid-19 pandemic may have caused many homeowners to pause their home selling plans, but that isn't the leading cause of the significant supply and demand gap in today's housing market. Take a look at what Sam Khater, Vice President and Chief Economist at Freddie Mac, Economic Housing and Research Division, had to say:
"The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes . . . That decline has resulted in the decrease in supply of entry-level single-family homes or, starter homes.'"
When you look into the number of homes built in the U.S. decade-by-decade, the problem becomes clear that the percentage of new home construction is not keeping up with the rate of people forming households - take a look at the U.S. Census Bureau.
Khater also explains:
"Even before the COVID-19 pandemic and current recession, the housing market was facing a substantial supply shortage and that deficit has grown. In 2018, we estimated that there was a housing supply shortage of approximately 2.5 million units, meaning that the U.S. economy was about 2.5 million units below what was needed to match long-term demand. Using the same methodology, we estimate that the housing shortage increased to 3.8 million units by the end of 2020. A continued increase in a housing shortage is extremely unusual; typically in a recession, housing demand declines and supply rises, causing inventory to rise above the long-term trend."
According to Freddie Mac, we need to build almost four million homes to catch up to the current demand. The good news is that builders are making strides to get us there. The U.S. Census Bureau also states:
"Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,766,000. This is 2.7 percent (±1.7 percent) above the revised February rate of 1,720,000 . . . Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,739,000. This is 19.4 percent (±13.7 percent) above the revised February estimate of 1,457,000. . . ."
What does this mean? Lawrence Yun, Chief Economist at NAR, clarifies:
"The March figure of 1.74 million housing starts is the highest in 14 years. Both single-family units and multifamily units ramped up. After 13 straight years of underproduction – the chief cause for today's inventory shortage – this construction boom needs to last for at least three years to make up for the part shortfall. As trade-up buyers purchase newly constructed homes, their prior homes will show up in MLSs, and hence, more choices for consumers. Housing starts to housing completion could be 4 to 8 months, so be patient with the improvement to inventory. In the meantime, construction workers deserve cheers."
Conclusion: There is one key thing to focus on if you plan to buy a home this year and want to be successful: patience.