02/22/2021
Why is the housing supply so low?
November 01, 2020
“You have people who want to buy a home and can—with job security, income level, and everything else they would need—but they can’t find a home in that price range,” says Real Estate Center Research Economist Luis Torres.
In fact, Texas had three months’ inventory or less for any price below a half million dollars. Demand remains strong even after this summer’s buying frenzy. Here, according to Torres, are the reasons why demand exceeds supply:
-Homebuilders are playing catch up:
Before COVID-19, homebuilders were trying to meet the demand for homes under $300,000. Shutdowns in the construction industry have delayed new inventory.
-Land prices are rising:
To make a profit on more-affordable homes, homebuilders are building in cities’ exurbs, where land is cheaper. But as land prices rise everywhere, there’s less affordable land on which to profitably build these homes. This trend has only accelerated during COVID-19.
-More Millennials have entered the market:
More first-time homebuyers means more competition for affordable homes. Many Millennials have more education and job security, so they are less likely to be affected by the pandemic’s economic effects.
-Prospective homebuyers aren’t as affected:
The pandemic’s economic effects are being strongly felt by renters and low-wage earners. In general, many people shopping for homes are still employed and/or working from home.
-COVID-19 is creating new preferences:
Many prospective homebuyers are looking farther away from cities to afford larger homes in less densely populated areas with newly prized amenities like home offices and outdoor space.
-Interest rates are historically low:
Homebuyers want to take advantage of this opportunity before rates rise again.
-Home prices keep rising:
Properties that sold in the $200,000-$300,000 range a few years ago might be worth more now.
Taken from Texas Realtors Magazine Nov, 2020 issue
