Much has been written about America's housing inventory shortage. When shopping for a home becomes more of an auction with houses getting multiple offers & a property's list price resembling an auction's reserve price, it's safe to say that the market is extremely lopsided. But why has it come to this?
1) Demographics: Demographically, the Millennial generation (those born between 1981-1996) has aged into the home-buying phase of life. As of 2019, this generation is the most populous in the U.S. and they're a large segment of the buyer pool. Many people are also choosing to 'age in place', that is, instead of selling the family home, they're electing to stay in place, often retrofitting the house to suit their needs. This lowers the number of single family homes available.
2) Investors: At the same time, tens of thousands of homes have become rental units & been indefinitely removed from the market because they've been bought by large corporations, hedge funds, limited liability corporations and investors who keep & rent these properties. One such company, Invitation Homes owns & rents more than 80,000 homes across 17 markets in the U.S. In July 2021, Invitation entered into a 'strategic relationship' with Pulte Homes, the nation's 3rd largest homebuilder to buy 7,500 newly constructed Pulte homes over the next 5 years which it will then rent out. That's a huge number of homes that are, in effect, rental inventory & cannot be bought by familes. Becoming a nation of house renters is a disturbing trend because renting eliminates one of the pillars of wealth for most people, i.e. home equity.
3) Insufficent Construction: Low levels of housing construction over the past decade have contributed to the housing shortage significantly. It is estimated that the U.S. needs an additional 3.8 million housing units to meet buyer demand.
For Homebuyers, the advice hasn't changed: be flexible on the 3 fundamentals of home buying, i.e. location, size/condition of the property & price; protect or improve your credit; save for as large a down payment as possible and closing costs; firm up your financing; work with a seasoned realty professional in the areas you're interested in; and, finally, make your first offer for a property your 'highest and best' offer because you may not get a second chance at a coveted property.
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