If you have been preparing to purchase a home in recent years, you are likely familiar with the severe shortage of available housing, which can present a significant challenge.
The scarcity of homes has resulted in an increase in home prices, competition among buyers, and, in many markets, bidding wars. However, what caused this shortage in the first place, and why has it persisted in recent years? Here is what you should know.
1. The slow pace of housing construction is one of the primary causes of the shortage. Builders have scaled back their operations since the 2008 housing crash. Additionally, there have been supply chain issues, rising lumber and material costs, and a shortage of contractors, all of which have made it more difficult to build new homes to increase the supply.
2. Homeowners choosing not to move is another factor contributing to the shortage. At present, mortgage rates are higher than they were during the peak of the pandemic. As a result, it does not always make financial sense for homeowners to find a new home, especially those who secured low-interest rates of 2% or 3% in recent years. Many older homeowners are also choosing to age in place, reducing the number of existing homes available for purchase.
3. High demand is another issue that is exacerbating the housing shortage. While demand has slowed somewhat due to higher mortgage rates, it still outpaces supply. Much of the demand comes from millennials who are now at the prime age for homebuying.
4. Furthermore, Institutional Investors are purchasing properties, which they intend to rent out, removing them from the market for sale. At one point last year, institutional investors accounted for almost 7% of all home sales.
Despite these challenges, with the right assistance, it is still possible to find a home that meets your needs. If you are prepared to buy, don’t hesitate to reach out today.