Key Takeaways:
- Patience is key for homebuyers in today’s super competitive sellers’ market.
- Homebuilders are ramping up construction to meet the high demand for single-family starter homes, which will lead to more choices for consumers in the overall market.
- Don’t despair, homebuyers—Linda Craft & Team are here to explain the lay of the land in today’s housing market.
What a Sellers’ Market Means for Homebuyers
A commonly asked question among homebuyers right now is, “Why is it so hard to find a house?” In today’s sellers’ market, real estate is super competitive for buyers. According to the National Association of Realtors (NAR), homes are getting an average of 4.8 offers per sale. This means that homebuyers have to be patient, especially given today’s low inventory environment.
Low inventory in the housing market isn’t new
The reality of the real estate market is that buyers can’t buy what’s not for sale. The housing market has been undersupplied for years now. Danielle Hale, Chief Economist at Realtor.com, explained that typically, about 200,000 fresh listings would have come to market in January or February. However, March 2021 still had roughly 117,000 fewer listings. As Hale noted, “We’re 19 percent below the new seller activity that we saw in the same week in 2019.”
What’s up with the serious lack of single-family home construction?
While many homeowners pressed pause on selling due to the pandemic, this isn’t the primary cause of today’s substantial gap between supply and demand. Sam Khater, Vice President and Chief Economist at Freddie Mac, Economic Housing and Research Division, cites “…the long-term decline in the construction of single-family homes” as the main force in the housing shortfall.
As shown in the above graph, the significant lack of new construction in the U.S. in the past decade is clear. This severe decline has resulted in the scarcity of entry-level “starter homes.”
It’s time to play catch-up in the housing market
Khaner explains that even before the COVID-19 pandemic, the housing market was facing a supply shortage, and that deficit has continued growing over time. According to the U.S. Census Bureau, there was a housing shortage of approximately 2.5 million units in 2018—that housing shortage increased to 3.8 million units by the end of 2020.
Freddie Mac estimates that the U.S. needs to build about four million homes to catch up to the current housing demand. The good news is builders are working hard according to housing starts—the number of privately-owned housing units on which construction has been started in a specified period. According to the U.S. Census Bureau, privately-owned housing starts in March 2021 were at a seasonally adjusted annual rate of 1,739,000. This is 19.4 percent above the February estimate of 1,457,000.
The light at the end of the tunnel is looming for homebuyers
After navigating an intense sellers’ market for months now, homebuyers should be relieved to know the light at the end of the tunnel is near thanks to ramped-up construction. Lawrence Yun, Chief Economist at NAR, cites the March number of 1.74 million housing starts as the highest in 14 years. The construction of both single-family and multifamily units has surged. As trade-up buyers purchase newly constructed homes, their previous homes will show up in the MLS, which means more choices for homebuyers.
Wanting to Buy or Sell? Let Us Help!
The key to today’s housing market is patience, and Linda Craft & Team are here to answer any questions you may have in the meantime. From start to finish, housing construction generally ranges from four to eight months, which means the Triangle area is about to be hot with newly constructed homes! Contact our team or call us at 919-235-0007 to work with the top Realtors in the Triangle.