For homebuilders and potential homeowners, it’s been a wild, bumpy ride in the housing market this year. Rising prices and the pandemic have caused major disruptions and have discouraged a lot of people from investing in real estate across the country.
But, all is not lost. Despite these hiccups, demand for houses still remains strong. If you are interested in purchasing or building a home, here are a few emerging trends in real estate that you may want to look out for before deciding to invest your money.
Severe housing shortage
There is a huge housing supply shortage in the United States today. The housing industry had never quite recovered from the 2008 housing bubble collapse and has been playing catch-up until now. COVID-19 has greatly compounded these effects which affected the supply change, making suppliers not able to keep up with an increasing demand for housing. The result: many real estate companies simply cannot keep up with the increasing demand. Today there is a 2.5 million unit housing shortage in the market today.
Ultimately, housing shortages across the country are forcing people to own a home in less desirable areas or delaying homeownership and renting instead.
Supply Chain Delays
“The No. 1 problem right now is increased building material costs and the delay in getting them,” says Jerry Howard in a FOX news interview. In a current market where there are more buyers than ever, it can be frustrating for first-time homeowners to experience these long delays to get the supplies they need to complete their homes.
Delays in the supply chain for building materials like lumber often mean long, construction delays. It also means that homebuilders are unable to obtain small but essential devices such as smoke and carbon monoxide detectors in order to get a COO (Certificate of Occupancy) permit from a local government agency before homeowners or renters can live in a home.
Rising Interest and Inflation
Rising interest rates and inflation are intertwined factors that hugely impact the real estate industry. Interest rates have been at an all-time low for the past few years, but in 2022 industry experts are predicting mortgage interest rates to rise as much as 0.25%. This potentially adds thousands of dollars extra on top of already steep mortgages that homeowners may find difficult to pay. Additionally, the cost of building materials such as lumber has more than doubled which contributes to the housing shortage that homeowners are currently experiencing.
It may be a little early to judge the effects they will have on the housing market, but it’s safe to say that these are trends to watch in the future.
More Buyers Than Ever Before
There are more buyers than ever in the housing market now—most of whom are millennials, people born from 1981 to 1996. Compared to their parents, they tend to buy a house later in life and now have come of age (the youngest millennial is around 41) in the middle of a major housing crunch. For the most part, however, this has not deterred them. 43% of real estate sales were closed by millennials in 2022, and sales from this age category are expected to grow.
Due to COVID-19, supply chain issues, inflation, and rising interest costs, it is clear that homeowners and renters alike are in the midst of a challenging era. However, for buyers, it is still a good time if you are planning to invest in real estate. There are still lots of opportunities for aspiring home buyers as high prices have lessened competition and left many properties open for purchase.