You probably understand what we mean when we say “Yikes!” if you’re looking to purchase a property right about now. To begin, there are so few houses on the market right now, particularly in the price ranges that are the most in-demand (such as those for first-time buyers), that those that are in good shape are selling quite rapidly, often with multiple offers.
Prices have increased due to a limited supply of homes that are now available. If you own a property and have been thinking about selling it, this is excellent news for you because it ensures that you will receive the highest possible price (again if your home is in good condition). However, it is quite frustrating for people who are looking to buy homes.
How long do you anticipate this situation to continue, and what steps should be taken to ensure that the market remains stable for purchasers?
Building additional brand-new homes would certainly be a positive step in the right direction. According to Diana Olick, who writes for cnbc.com, the rate of development of single-family homes is at its lowest point since 1995.
According to Emily Badger of the New York Times, “More home construction will help, and it has been increasing.” However, the United States has been underbuilding for such a long time that it will take years to meet demand because of the extent of the underbuilding.
So, why aren’t they building?
There are a number of reasons that developers have backed off residential construction. Money, of course, is at the root of most of them, but effects of the pandemic, such as the supply chain crunch are certainly contributing factors as well.
“Builders report shortages of windows and doors and flooring and appliances, and I’ve even heard stories of garage doors that are not going to arrive for months,” Robert Dietzhe with the Home Builders Association tells marketplace.org’s, Mitchell Hartman.
Add a worker shortage to the supply chain issues and it’s understandable why the pace of new-home construction isn’t anywhere near where it should be.
“As more skilled workers retire from the industry … not enough young people are coming in,” Ed Brady, CEO of the Home Builders Institute tells Amy Scott at marketplace.org.
Additional challenges to the construction industry include “The pandemic, … growing inflation, … and the potential passage of all or part of the Build Back Better legislation …” could have a dramatic impact on the construction sector this year,” said the American Institute of Architects chief economist Kermit Baker.
Then, there is the existing home market.
When will prices come down?
Most of the factors that are encouraging a rise in home prices interact. So, if one-factor changes, it may help others to loosen their grip on the market. These factors include (but aren’t limited to):
- Not enough homeowners selling their homes
- Soft supply of newly constructed homes
- High demand for homes
- Low mortgage rates
- An improving labor market
The factor with the most impact right now is that there aren’t enough homes for sale to meet the demand. Even with the expected mortgage rate hikes this year, there won’t be homes to meet the demands of homebuyers left in the market, according to Ally Yale with The Motley Fool.
“… it’s likely that price growth will start to taper off as we get further into 2022,” she notes. “Make no mistake, though: Prices aren’t suddenly going to drop,” this year.
As you can see, when home prices will reverse their ascent is anybody’s guess. There are just too many variables to allow for an accurate prediction. Since we keep our eye on the economy, however, keep checking back for updates.
