Factors Impacting Housing Supply
If you've been in the process of planning to purchase a home over the past few years, you're likely familiar with the significant shortage of available housing inventory, which poses a challenge for prospective buyers.
The limited supply of homes has resulted in escalating prices, intense competition among buyers, and, in many markets, even bidding wars.
However, what caused this shortage initially? And why has it persisted without much change in recent years? Let's delve into the details you should be aware of.
Reduced Pace of Housing Construction: Builders have scaled back their activities since the housing crash in 2008. Additionally, factors like disruptions in supply chains, the increasing costs of materials such as lumber, and shortages of contractors have further complicated the process of constructing new homes and consequently hindered the increase in supply.
Homeowners Opting to Stay: Presently, mortgage rates are higher compared to the levels observed during the peak of the pandemic. This has made it less appealing for homeowners to seek new properties when considering the significantly lower interest rates of around 2% to 3% experienced just a few years ago. Fewer homeowners are choosing to sell due to these interest rates, while many older homeowners are opting to age in place, resulting in a limited number of existing homes being listed on the market.
Strong Demand: The demand for home purchases surged during the pandemic. Although it has slightly subsided due to the rise in mortgage rates, the demand still surpasses the available supply. Much of this demand stems from millennials, who have reached the prime age for purchasing homes.
Institutional Investors: Large investors are also acquiring properties, often with the intention of renting them out. As a result, these properties are taken off the market for sale. At one point last year, institutional investors accounted for nearly 7% of all home sales.
Despite these challenges, it is still possible to find a suitable home with the right assistance. If you're ready to embark on the homebuying journey, don't hesitate to reach out today.