This Is Why Home Prices Won’t Drop Dramatically Anytime Soon
In normal times, homebuyers could sit out a “seller’s market” like you would a rain delay at a baseball game. Extend your apartment lease a little longer, and confidently wait for the market to swing back into the favor of buyers before pouncing on listings.
Seller’s Market
But things look different now as an extreme seller’s market has formed. The good news: A combination of more new sellers and higher home costs has meant a growing number of homes available for sale, explains Danielle Hale, the chief economist for Realtor.com. The not-so-good news: The metrics Hale looks at to signal a shift to more buyer-friendly conditions (like time on the market) haven’t budged, and in some cases continue to worsen. To put it another way? Even though things are easing up for buyers, the market is so drastically tilted in favor of sellers, it may take several months before buyers see reassurance with things like price and time on the market data.
How Did We Get Here?
So how did we get here — a place where homes sell for over list prices and buyers are trying every trick in the book (Rent backs! Escalation clauses! Waiving property inspections!) to make their offers stand out? You can wag your finger at the acute shortage of homes.
You see, after the subprime mortgage crisis in 2008, the housing industry became extremely cautious and home construction stalled. Most of the smaller builders that went out of business between 2008 and 2010 never came back at all, says Michael Perna, Realtor with the Perna Real Estate Team in Novi, Michigan.
Limited Supply
Home builders produced an incredibly limited supply of new homes between 2009 and 2021, says Bryce Fuller, broker with Baird & Warner in Northbrook, Illinois. This short supply will remain for several years, he says. Plus, with remote work here to stay, many people are moving about the United States, which is compounding shortages in some areas (especially warm climates) that weren’t braced for a population surge among would-be homebuyers.
On top of all this, builders over the past decade have faced challenges including rising costs for land, labor, and materials, Hale explains.
Written By: Brittany Anas, Published By: Apartmenttherapy.com
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