If you have been faithfully saving your money and preparing yourself to buy a home in this market you have to be scratching your head and asking, Why are home prices so high??? Well, first, stating the obvious, there’s the whole supply and demand issue at play. There – are – so – few – homes – available (especially in the more popular price ranges such as those for first-time homebuyers) that those in good condition sell at lightning speed, and in most cases with multiple offers. A tight inventory of available homes and multiple offers inevitably drive up pricing.
Now, if you’re a homeowner thinking about selling your home, this is fantastic news because you’ll get top dollar. For homebuyers, however, it’s beyond frustrating.
So, how long is this situation going to last and what needs to happen to stabilize this market for buyers?
Well, one thing that would help is for builders to build more new homes. “Single-family home construction is running at the slowest pace since 1995.” according to cnbc.com.
In addition, the New York Times reports “More housing construction will help — and it has been increasing — but the United States has been underbuilding for so long that it will take years to meet demand.”
SO WHY AREN’T THEY BUILDING?
There are a number of reasons that developers have backed off residential construction. Money, of course, is at the root of most of them, but effects of the pandemic, such as the supply chain crunch are certainly contributing factors as well.
Builders are reporting shortages of windows, doors, flooring, appliances, and even garage doors, with wait times extending out for months before they arrive. Add a worker shortage to the supply chain issues and it’s understandable why the pace of new-home construction isn’t anywhere near where it should be.
Another wrinkle to the growing problem is the number of skilled workers retiring from the industry and not enough young people filling those open positions. And that’s not even including the residual challenges from the pandemic and the current growing inflation.
Then, there is the existing home market.
WHEN WILL PRICES COME DOWN?
Most of the factors that are encouraging a rise in home prices interact. So, if one factor changes, it may help the others to loosen their grip on the market. Some of those factors include:
- Not enough homeowners selling their homes
- Soft supply of newly constructed homes
- High demand for homes
- Low mortgage rates
- An improving labor market
The factor with the most impact right now is that pesky issue we spoke about at the beginning of this video: there aren’t enough homes for sale to meet the demand. Even with the possible mortgage rate hikes expected later this year, there won’t be enough homes to meet the demands of homebuyers left in the market.
According to The Motley Fool, it’s likely that price growth will start to taper off as we get further into 2022; however, prices aren’t suddenly going to drop this year.
As you can see, WHEN home prices will reverse their ascent is anybody’s guess. There are just too many variables to allow for an accurate prediction, but I’m always keeping my eye on the market so keep checking back with me for updates.
And if you have any specific questions you’d like to discuss, feel free to reach out to me by phone, text or email. Everyone’s circumstances vary and not everyone has the luxury of being able to wait out the current market. And honestly, that’s a big fat maybe if the market ever reverses so I’m happy to brainstorm with you to find the best possible scenario for your homebuying needs.
