WHY ARE THERE SO FEW HOMES ON THE MARKET?
The coronavirus pandemic did not create the shortage of homes we face, but it did contribute to the problem and expose many of the issues that buyers have faced over the 30-40 years. There are simply not enough new homes being built and the location and type of new housing has shifted.
An inadequate number of additional new construction homes is the major factor, but other variables from COVID compounded the challenges buyers are experiencing today.
SPREADING OUT – Quarantined employees grew weary working from home and began to covet wide open spaces. The importance of where you lived shifted from the city to the suburbs. Demand for urban and rural areas quickly outpaced supply and many fled the city for the suburbs.
CERTAINTY – The ability to work from home remotely made the importance of “home” greater. The uncertainty of one’s employment, health and family have always factored into the decision to sell. Relocations, divorce, death, additions to the family, marriage, etc., all are part of the equation and COVID dramatically contributed to the change of that dynamic. Given the uncertainty of COVID, when faced with the option to make a move or not, the preferred choice was to stay put. Equity from higher values and low interest rates contributed to the decision for others to opt to remodel or add-on to their existing home rather than sell. Certainty and security were more important that cashing in on record-high home equity.
NEW CONSTRUCTION - Building more new homes is, of course, an obvious solution to the supply challenge. New homes only require a single buyer -- there is no home owner selling who is competing with other buyers. Housing availability and affordability has been a growing concern for years, not just as a result of the pandemic. Supply-chain and labor shortages, tighter regulatory requirements, and strict zoning laws have all contributed to the inventory challenges we now face.
A slice of the American Dream appears to not be as important to millennials these days. The desire to buy a home is pushed back because more people are getting married later in life. Some feel that rising home prices make home ownership impossible. Smaller homes, increased housing densities, changes by government in zoning and regulatory requirements, and more new construction will all be key to address the complex and challenging issues facing the real estate industry now and in the future.