Where have all the homes gone?

Where have all the homes gone?
  • Written on April 01, 2021 By Stanley Martin

With an increase in working remotely, simply being at home more, and record low interest rates, it’s easy to see why more and more people are upgrading their homes and moving to larger spaces. While the trend steadily continued throughout 2020 and is expected to continue in 2021, it has provided a pretty big shock to the housing industry.

What does this mean for potential homebuyers? Ultimately, there are some outside factors at play now that homebuyers didn’t have to account for previously. If you’re looking to buy a home this year, here are some things you need to know that could affect your purchasing timeline:

  1. Sky-high demand. Why pay rent to stay within a small two-bedroom apartment in the city when you can pay the same amount for a home in the suburbs? With people working and learning from home, this question became a massive reason why home demand skyrocketed in 2020. Paired with decreased interest rates, people who were previously renting realized that they could become a homeowner with less hassle than ever. In January 2021 alone, a study showed that over 58% of home offers were engaged in a bidding war. The typical home sold in January was under contract in 34 days – that’s 22 days less than 2020.
  2. Lumber prices are vastly increasing. This was one of the first dominoes to fall and affect the homebuying process. Lumber prices since last spring have increased more than 180% and that has had two main effects on homes: it’s making it hard for builders to find enough lumber to start new construction and the builders that have lumber need to increase their prices to account for additional spending. The surge has affected construction teams across the country and with lumber being used in every aspect of the building process from structural framing, flooring and cabinets to roofing and more, it’s unknown when prices will go back down.New home construction slowed down. As a result of several changes, new construction slowed down in some areas in 2020. To account for this pause, homebuilders are now working twice as hard to make sure they can still provide plenty of options for homebuyers to consider. Due to cities reopening and more available land, single-family homes are being constructed at a record pace, 12% faster within December 2020 – it’s the highest housing starts and building permits have been since 2006.
  3. Move-in-ready inventory is declining. With so many families and individuals seeking a new place to call home on the drop of a dime, more and more homebuyers sought out move-in-ready homes that they could jump in, unpack and set their feet up within a few months. This increase was amazing for homebuilders initially, but now homebuilder inventory has decreased dramatically, with builders only having around 3.3-months’ worth of homes readily available.
  4. Increase in second homes. Not only is the market competitive for first homes, with the pandemic, demand for a second home doubled in 2020. Interest in a second home is even 50% stronger than for primary homes! Outside of those looking for additional real estate, those with vacation homes have been less likely to sell their property, as they now have somewhere to safely stay outside of their primary home.

The market for homebuyers has drastically changed, but this doesn’t mean you have to cast aside your hopes of purchasing a new home. Just keep these factors in mind and with some patience and guidance, you’ll be right at home in no time. Have any questions? Feel free to reach out to our team of experts who can help answer any that you have about buying a home in today’s market.