Real Estate Marketing & Beyond
More home buyers are being tempted onto the market by the incredibly low mortgage rates being offered, but they’re becoming increasingly frustrated at the limited choice of homes for sale.
The combination of an unseasonable surge in buyer demand and reduced housing inventories, there simply aren’t enough homes to satisfy everyone who’s looking, CNBC reported.
Indeed, housing inventories nationwide fell 2.5% in September, compared to the same month one year ago. But the situation gets even worse when we consider the most affordable segment of the market. According to CNBC, inventory of homes priced at $200,000 or less is down 10% compared to a year ago, while the $200,000 to $750,000 segment saw no change. Unfortunately, economists believe inventory in that price range will also fall in the coming months.
“If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of home buyers are going to feel its effects as their options rapidly dwindle,” George Raitu, realtor.com’s senior economist, told CNBC. “September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020.”
The most likely result of this growing demand for homes and the shortage of available options is that home prices will rise, which may eventually help to reduce demand and balance things out.
But right now, buyers are being increasingly tempted to have a look due to the low mortgage rates on offer. According to Freddie Mac, the 30-year fixed-rate mortgage hovered around 3.5% in September, well below the average of 5% we saw last November. And both new and existing home sales have increased simultaneously, as rates decline.
Even worse, it seems builders are unable to make up the shortfall. Robert Dietz, chief economist of the National Association of Home Builders, told CNBC that new construction is unlikely to be fast enough to provide buyers with the options they want at affordable price points. He said that just 10% of sales of newly built homes are priced at $200,000 or less, whereas that percentage was at 40% just ten years ago. He adds that the new home market is undersupplied by around 1 million housing units overall.
“We’ve faced what has been called a perfect storm of supply-side challenges,” Dietz said. “There has been an ongoing labor shortage, we lack the necessary land and lots to build homes, we’ve had building material cost concerns, and then probably the most important factor has been higher regulatory costs since the Great Recession.”
