Real Estate: It’s Still a Lack of Supply, Not a Lack of DemandOne of the big questions real estate professionals are asking these days is whether prospective homebuyers still believe
Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand
Dated: August 20 2021
One of the big questions real estate professionals are asking these days is whether prospective homebuyers still believe purchasing a home makes sense. Homebuyers Claim rapidly rising home prices are impacting demand and, by extension, leading to the recent slowdown in sales activity.
However, demand isn’t the real issue. Instead, it’s the lack of supply (homes available for sale). An article from the shows this is true for new home construction:
The article quotes David Auld, CEO of (the largest homebuilder by volume in the United States since 2002), explaining how they don’t have enough homes for the number of buyers coming into their models:
Danielle Hale, Chief Economist for , also explains that, in the existing home sale market, the slowdown in sales was a supply challenge, not a lack of demand. Responding to a recent uptick in listings coming to market, :
Again, the buyers are there. We just need houses to sell to them.
If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate – but this isn’t the case. As Mark Fleming, Chief Economist for , :
Instead, we’re seeing price appreciation accelerate throughout this year, as evidenced by the year-over-year percentage increases reported by :
· January: 10%
· February: 10.4%
· March: 11.3%
· April: 13%
· May: 15.4%
· June: 17.2%
There’s a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.
Though home prices have risen dramatically over the last 18 months, mortgage rates remain near historic lows. Because of these near-record rates, monthly mortgage payments are affordable for most buyers.
While homes are less affordable than they were last year, when we adjust for inflation, we can see they’re also than they were in the 1970s, 1980s, 1990s, and much of the 2000s.
A shows renting a home takes up a higher percentage of a household’s income than owning one. According to the analysis, here’s the percentage of income homebuyers and renters should expect to pay now versus at the end of the year.While the principal and interest of a monthly mortgage payment remain the same over the lifetime of the loan, almost every year.
Whether you’re a homeowner or an investor, real estate builds wealth through growing equity year-over-year. If you own, your household is gaining the benefit of that wealth accumulation. :
Odeta Kushi, Deputy Chief Economist at , elaborates in a :
Today, that equity buildup is substantial. The (NAR) reports:
In 94% of markets, there was a greater than 10% increase in median price. That means if you bought a $400,000 home in one of those markets, your net worth increased by at least $40,000. If you rented, the landlord was the recipient of the wealth increase.
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