Housing experts throughout the US are currently experiencing a “white hot” market thanks to a multitude of economic reasons. However, problems that existed in the industry before the pandemic are being just as exasperated due to the impact of the past year overall.
“One of the most prominent housing issues in pre-pandemic America was supply shortages. That has carried over and exacerbated, but we already had evidence of supply shortages heading into the pandemic,” said Matthew Murphy, executive director of the Furman Center For Real Estate and Urban Policy at New York University.
Murphy also explained that “today’s housing situation has its roots in the last boom-bust cycle. The context here to this current housing moment is that we were still recovering from the 2009 foreclosure crisis, when property values plummeted.”
According to the National Association of Realtors (NAR), over the past two decades an underbuilding gap of between 5.5 million and 6.8 million housing units has existed since 2001.
The National Association of Home Builders found that of “all the new single-family homes built last year across the U.S., none were priced below $100,000. A mere 1 percent fell in the range of $100,000 to $150,000. Home buyers in the bottom one-fourth of the market have been squeezed entirely out of the market for new construction,” the group said in an online post.
“In a pandemic, with people working from home and kids schooling from home, you need more space. We saw a real pickup in demand. People wanted a home with some green space and a community with lower population density.”
“The increase in demand has really been sparked by the record low level of mortgage rates. That’s a real opportunity for anyone who’s shopping for a mortgage or shopping to buy a home, and that’s really sparked the demand, especially among millennials or Gen Xers,” explained Frank Nothaft, chief economist at CoreLogic.
Prospective buyers are also noticing a major decrease in available homes due to the fact that those who weren’t as economically stunted by the pandemic have been able to get out and acquire more real estate within the past few months of recovery.
“You’ve got this 20-plus percent year-over-year price growth, which you think would entice homeowners to sell. The bigger factor is just availability of supply to move into. … There’s nothing to go buy or downsize into,” said Todd Teta, chief product officer at Attom Data Solutions.
Zillow found a nearly 4% increase in housing availability on the market in May, which has been the first time that percentage has increased since July 2020. The NAR found that the average price of existing homes throughout the US have hit a record number of $350,000; up nearly 25% when compared to last year.
“This is supply and demand on steroids.”
The other major issue is that builders, architects, and construction workers can’t keep up with the demand that the pandemic has created. Costs for certain raw materials like copper or lumber are projected to continuously increase within the next couple of months. That in addition to labor costs and the cost of land overall is causing a lot of buyers to be hesitant with their purchases.
“There’s an affordability that comes with density, and in a lot of America, you can’t build that kind of housing. This just makes it harder for the market to supply this housing en masse,” Murphy explained.
“If we see a substantial increase in the proportion of the workforce working remotely, then I think we’re going to continue to see some of this shift to single-family and this shift not just to suburban but to the outer edges of metro areas. When you sever that link between where you live and where you work, then that gives you a lot of flexibility on where you locate,” Nothaft said.
Eric Mastrota is a Contributing Editor at The National Digest based in New York. A graduate of SUNY New Paltz, he reports on world news, culture, and lifestyle. You can reach him at firstname.lastname@example.org.