Housing Shortage Is About to Get Worse
- Author: Jeffrey Simmons
- Posted: 2024-03-29
According to an analysis of the real estate market released by an industry watchdog on November 28, America's housing shortage is about to get worse. The combination of a solid stock market, good vaccine news and market-friendly cabinet picks for the upcoming Biden administration have lead to rallies that will make housing less affordable and cause the current shortage of new housing units to persist.
Mixed Week for Real Estate Performance from Holiday and COVID-19
Some housing units that would have been on the market might not be on it because of COVID-19 quarantines, explained the report. People who are adhering to local guidelines to stay home and only leave the house for essentials, such as medical care, medication and the grocery store. Even so, the sales of new homes exceeded analysts' expectations. October's sales were 41.5% higher than October 2019's sales. The housing boom shows no signs of slowing.
The Pricing Factor
The selling prices of homes are increasing at the fastest rate in more than 10 years. The high demand for single-family residences is at odds with the low inventory. The result is a historic housing shortage. Only those with relative wealth seem to be able to get in on the fast market.
COVID-19 News Plays a Role
The past week had some positive developments in regards to a COVID-19 vaccine. Three manufacturers have vaccines that are shown to be effective. Those companies expect to start distributing batches of their vaccines by the middle of December. The first doses will go to healthcare workers and first responders. Most of the vaccines require two doses to provide immunity to the SARS covariant-2 virus that causes COVID-19 disease. Pfizer, AstraZeneca ad Moderna all have vaccine candidates with products getting packed and ready to ship.
Investors Have Confidence in the Change of Leadership
Wall Street shows enthusiasm about the picks President-elect Biden has made for key posts in his cabinet. His picks are known to be market-friendly. The former Federal Reserve Chairperson Janet Yellen is President-Elect Biden's choice for the position of Secretary of the Treasury.
Mortgage Applications Are on the Rise
New applications for mortgages to purchase a single-family home have increased by 19% for the month of October compared to October 2019. The refinancing applications are 79% higher than they were a year ago. One reason for the increase in mortgage and refinance applications is that the 30-year fixed rate for mortgages is at an all-time low of 2.92%.
Lack of Available Homes for Sale
The supply of new homes for sale was 13.4% lower in October 2020 compared to October 2019. he current inventory of new homes is just 3.3 months' worth. The most recent peak was 7.4 months' worth, which occurred in late 2018. For existing homes, the inventory is 19.8% lower. This is just a 2.5-month supply at the current pace of home sales. That is the lowest inventory in more than 40 years of tracking home sales. More than 70% of the homes sold last month were on the market for less than four weeks.
Acceleration of Home Price Growth
Despite so many people being out of work as a result of the COVID-19 pandemic, the prices of homes sold have increased. Not only have the listing prices gone up, but buyers have gotten into bidding wars that are further bolstering the final sales price. Home values increased at a rate of 7% per year as of September. The median prices of homes sold in September 2020 were 15.5% higher than those sold in September 2019. Some analysts think that this is going to cause another housing bubble. The home prices are outpacing the increases in total income and disposable income, which were 6.2% and 6.4%.
Who Is Getting Priced Out of the Housing Market
People of color are disproportionately getting priced out of the housing market in the current real estate market. In general, people of color have less savings and aren't able to make as large of a down payment or pay cash compared to white home buyers. People of color also experienced a disproportionate rate of job loss as a result of the COVID-19 pandemic. Fewer white-collar workers lost their jobs or experienced a furlough compared to blue-collar workers. Young buyers are also getting priced out of the market. They're having a tough time finding jobs, and many of them are saddled with high debt from student loans.
