When the COVID-19 pandemic first started, experts predicted the housing market would suffer compared to 2019. However, after governors eased lockdown restrictions, the exact opposite occurred.
The pandemic, which unfortunately naturally spread in city settings, motivated buyers to flock to the suburbs and start buying houses at lightning speed.
But buyers had limited inventory to choose from even before the coronavirus pandemic.
Before COVID-19, Americans faced a housing shortage of “around 5 to 6 million homes due to multiple years of underproduction of new homes,” according to The National Association of Realtors (NAR). Since the start of the pandemic, the national housing inventory declined 32.6 percent year-over-year, and newly listed properties fell 13.4 percent across the country, according to Money.com.
Americans’ desire for more square footage, a home office, and distance from their neighbors furthered a housing shortage, which we can now officially call a housing crisis.
The housing shortage has continued to intensify. Potential buyers partake in bidding wars, which drives up the costs of homes on the market. This pushes a lot of first-time buyers out of the running. If you have wanted to sell your home for a while, it’s a great time to do so, but you may face a challenge finding a new place to live.
Is There A Housing Shortage?
When there are more jobs created in a metropolitan area than new homes built, you can dub it an official housing shortage. NAR defines a housing shortage as less than 1 new permit for a house for every two jobs created.
“Limited supply of housing has been an issue for years — since the recovery from the Great Recession,” Susan Wachter, Sussman Professor of Real Estate and Finance at The Wharton School of the University of Pennsylvania, told Money.com. “In the year of COVID, demand will continue to outstrip supply.”
But there’s some good news on the horizon: new construction for both single-family and multifamily units grew 23 percent from one year ago, as of July. This matches pre-pandemic activity in the first quarter, according to NAR. However, those are not ready to be moved into right away. States consider construction essential business, but halted construction in March in April when the pandemic first hit.
“The rise of single-family units is welcome, as overall inventory of homes for sale are down by 19 percent from one year ago and there is intense buyer competition in the market as a result,” said NAR’s Chief Economist and Senior Vice President of Research Lawrence Yun on the organization’s website. “But new home construction is not rising in the West region where the inventory shortage is most acute. Overall, the numbers are good although many more months of such trends are needed.”
Yun predicted inventory shortages for the remainder of 2020 and a possible “semblance of a balanced market in 2021.”
“With housing shortages across the country, construction jobs need to ramp up,” Yun said on NAR’s website. “My estimate is that 3.5 million residential construction and general contractor jobs are needed to fully supply the market with new inventory.”
Is Now The Right Time To Buy A House During A Housing Shortage?
Deciding when is a good time to buy a house is a profoundly personal decision. According to a Pew Research Center report, 1 in 4 Americans struggled to pay their bills during the pandemic due to the economic fallout.
If you have been lucky enough to not suffer economically during the pandemic, take advantage of low mortgage rates. The 30-year-fixed mortgage rate sat around 2.9 percent on Sept. 24. Anything below 3 percent ranks as a historic low, which we have seen for months.
If you plan to take advantage of these rates, get pre-approved with Rex Home Loans for the best rate possible. Rex Home Loans doesn’t pay our brokers commission, which means they have your best interest at heart and can offer a low, competitive rate.
Home sales now continue with little interruption due to the pandemic. The industry adapted to offer virtual showings, virtual closings, or wear personal protective gear during showings.
While we wait for contractors to finish new home construction, existing home sales rose for the third consecutive month, by 2.4 percent in August. This ranks as the highest level for pre-existing home sales since December 2006.
Prepare yourself for any homes you wish to view to stay on the market for a limited time – in fact, about 18 days less than last year – and a possible bidding war with other potential buyers.
“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” Yun said on NAR’s website. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”