Did The COVID-19 Crisis Cause The Housing Shortage?
Tuesday July 27, 2021
There are too few homes for sale today to meet the needs of buyers. Said another way, buyers far exceed sellers. This is causing housing prices to continually hit new all-time highs while simultaneously creating the most competitive real estate market in history.
Competing for a home in this market can make you feel exhausted, frustrated, and make you want to give up. DON’T DO IT! Keep at it, your home is out there if you stay unrelenting and use the Bullet Proof Buyer Program.
It will also help you to better understand WHY the housing market is where it is.
Where did the housing shortage come from?
The COVID–19 pandemic did a number on the housing market this past year, but it can’t take all the credit for the current inventory shortage. While the pandemic did cause home sellers to hold off on listing their homes, the truth is this low housing supply has been years in the making.
The root cause for our current housing market is the long term decline in construction of single family homes. New home construction has been falling behind for quite some time now. A recent report from the National Association of Realtors (NAR) tells us that historically, home builders completed an average of 1.5 million new housing units per year. But since the housing bubble burst in 2008, the level of completed new construction has fallen drastically.
The same NAR report elaborates on the underbuilding gap in the U.S., totaling more than 5.5 million houses in the past 20 years from 2001-2020. Closing an underbuilding gap that large would take the next 10 years – even with building more than the historical norm.
Does this mean the sellers’ market is here to stay?
Luckily, we are already seeing a good uptick in new home construction. However, newly built homes can’t bridge the gap we are facing on its own. In order for us to fix our supply issues, more single family homes must come on the market.
An important factor in today’s market is the number of homes for sale. While inventory levels continue to sit near historic lows, there are indications we may have hit the lowest point.
To put it into perspective, the graph below shows levels of inventory rising slowly since the beginning of the year:
We know it’s challenging out there. Don’t give up! The best advice we can provide buyers is to learn about the Bullet Proof Buyer program and request a consultation from one of our mortgage advisors.
