Top 3 Challenges for Home Buyers Today

Although it’s easy to tie every change to COVID-19, forecasters for Realtor.com in their December 2019 research forecasted that 2020 would be defined by lower home inventory. At that point, pre-COVID-19, these researchers anticipated that Gen X and Baby Boomers would hold onto their homes. Also cited was rapidly sinking mortgage rates that encouraged Millennials to start considering a home purchase. 

At that point, these researchers also estimated that an “adequate” home supply would be years away -- and they could be right. Now, fast-forward to our current state of the real estate market that indeed shows unprecedented low inventory. As Zillow researchers reported, there are 20% fewer homes this year compared to the same period in 2019. 

Historically Low Interest Rates

Even when COVID-19 appeared, mortgage rates were already continuing to drop. In fact, since the pandemic started, rates have kept falling. 

These lower interest rates translate to greater buying power. This means that homebuyers can qualify for a larger mortgage so they are not dissuaded by the strong home prices. 

Fewer New Home Constructions Projects

According to statistics gathered by the U.S. Census, new home construction continues to be lower than 2019 by nearly 9%. This decrease has been part of a decade-long drop in new construction projects around the country. Yet, research suggests that home builders must produce one million homes each year to address the needs of the new U.S. households that are also formed each year. There is already a housing shortfall that will eventually impact the country. 

With this ongoing demand for housing, many new home builders are starting to look at how to restart projects in the face of COVID-19. This includes determining how to access supplies more than the talent to complete the work. When possible, new homes could be the answer to help address the low inventory. 

More Demand 

The newer generations of homebuyers are much larger than previous ones, and they are ready to buy thanks to pre-COVID-19 low unemployment and job stability that many still enjoy despite the continuation of the virus. 

Armed with steady incomes and money for down payments, there are many confident buyers that are actively involved in pursuing what’s currently available. There have even been some bidding wars because these buyers are willing to pay above asking price to get what they want. 

An Immovable Older Generation

The larger numbers of people willing to buy a home, combined with older generations that have decided to stay put, have added to the low inventory figures. 

With COVID-19, many older homeowners just want to stay in the security of their homes rather than risk moving during these uncertain times. 

As the other part of the home supply equation, more buyers and fewer sellers equates to lower inventory. 

What’s on the Horizon?

With historically low interest rates and inventory, many homebuyers and sellers are wondering what’s going to happen next for the real estate market. Some who have considered selling have pressed pause to see where the economy might go. 

According to Zillow’s economists, they predict slight declines in home prices by Fall 2020 followed by prices that reflect pre-COVID-19 values. What happens will be based on what federal and state governments may do in light of the pandemic and need to get the economy back on track. 

There are many homeowners that may have not been paying their mortgages due to forbearance arrangements, so there will need to be further protection in order to keep the number of foreclosures from rising. Other economic factors that will impact the housing market include the continued availability of unemployment benefits and financial aid for businesses and individuals. 

What You Can Do as a Buyer

Despite the uncertainty across so many economic factors, buyers should make themselves as prepared as possible to be an attractive candidate for one of the few homes available. That means getting pre-approved by a mortgage lender and showing excellent credit and steady income. 

Home buyers also need to consider their budget, how high they can afford to go on prices, and if there are trade-offs in terms of their housing features list. Most importantly, it’s good to do an assessment of where your life may be in the next three to five years so you can determine if buying a home is the right step right now. 

Expert Advice

If you are considering buying or selling, now is the time to call Liz at 951-970-4771 to get further insights about your next steps.