There is a limited number of houses currently available for sale, and the construction of new homes is too slow while many buyers are jostling to get one. New construction is further hampered by shortages in the supply of materials that cause steep price increases. Some homebuilders are waiting for materials supply and prices to stabilize before resuming their projects. Hence, many overly eager homebuyers settle for just any house they can get. This can be an unwise decision that will lead to buyer’s remorse.
The Current State of the Housing Market Sets You Up for Panic Buying
It is like Black Friday in the housing market, except that instead of having bargains all over, it is the opposite. Troves of homebuyers are elbowing each other to purchase costly homes as if these are soon to become extinct commodities.
Extinct is an exaggeration. However, while there are still houses under construction, these will not be enough to cover the shortage for many years to come. This was explained by Taylor Morrison homebuilders chief executive officer Sheryl Palmer to CNBC recently. The shortage began long before the pandemic and, according to the National Association of Realtors (NARS), as early as 2021. This led up to the current shortfall of between 5.5 million to 6.8 million housing units. According to Realtor.com, the national inventory of active listings this June has decreased by 43.1 percent from last June.
The unbelievable demand makes listed houses stay on the market for truly short periods, typically just 37 days in June across the country. This is almost twice as fast as the 72 days they lasted on listings in June last year.
Expect even more homebuyers to jump into the fray as rents increased drastically nationwide in June, as reported by Zumper. The 2021 national index shows that for that month, there was a 6.5 percent year-over-year increase in median rent for two-bedroom units across the country. There was also a 4.9 percent year-over-year median rent increase for one-bedroom units. Renters are reeling with this unexpected additional expense because rents were stable in 2019, and increases in 2020 were only in the vicinity of one percent.
Mortgage rates remain at historical lows, making borrowing accessible to many. This will fuel decisions to buy a home instead of continuing to rent. The difference between the amount of monthly rent and a mortgage may have narrowed enough for renters to realize that investing their money into homeownership is better.
Choose Your Purchase Wisely
Purchasing a home must not be an impulse buy, though. Be extremely judicious and choose wisely because you will be putting a large share of your income towards mortgage payments for years to come. You will also be literally living in the consequences of your choice.
Assuming that you have already acquired a mortgage approval and have a pre-approval letter from your lender, the first thing you must decide on is location. It is okay to have several location options as long as each one serves your needs. Consider what is most important for you, such as the quality of nearby schooling. For those who will be going back to work in an office, the commute will also be a major factor. For those who will continue to work remotely, this will fortunately not be a consideration.
Among the available houses within your budget in your desired locations, always do home inspections. This is non-negotiable. If other buyers edge you out because they opt to give up their right to this, let go. This is your opportunity to have a professional inspector thoroughly vet the house’s condition to ensure that you do not have any problems with it afterward.
Ensure that the inspector also checks for health and safety issues, such as toxic contaminants like lead paint, asbestos, mold, radon gasses, and meth residue. You must find out beforehand if the professional inspector you are hiring is qualified to do such checks. Ask the inspector what it will take and how much it will cost to completely eradicate these contaminants and decide if that is within your budget. You can also negotiate with the seller to shoulder the cost of all necessary work on the property and have another round of inspections afterward before agreeing to buy the house.
Another step you must not miss before purchasing a house is the home appraisal. Your mortgage lender will also require this. Again, hire a professional appraiser who will determine the true value of the property. This will be based on the size of the home, its amenities, the price of similar properties, and current market pricing trends. The valuation must be equal to or more than the selling price. Otherwise, the sale will not be approved by your mortgage lender.
Be a Satisfied Homeowner
If you have done due diligence in your house purchasing journey, you will end it as a satisfied owner of a new home. Congratulations, and enjoy living in it.
Meta title: Do Not Get Railroaded by the Housing Shortage
meta desc: Because available homes are limited and construction of new houses is slow, buyers often buy indiscriminately, but you must instead be extra careful in choosing the house you will purchase.