Hint: Inventory shortage set to continue...
There continues to be good news for home sellers in our region and challenging news for home buyers in the coming months. Demand continues to remain high in the midst of an inventory shortage, which shows no signs of abating anytime soon.
For sellers, that means it’s likely going to remain a good time to sell, with loads of competition for starter- and mid-range residential properties commanding favorable prices. For buyers, it means finding the home of your dreams may be a bit more difficult than we’d like, and acting fast is key. More, buyers may expect to pay more as long as this hot market lasts.
The good news is mortgage rates remain at historically low levels for now, though they are anticipated to climb throughout the year. Plus, some industry experts are predicting that buyer demand could cool this year, which could loosen inventory constraints. Finally, homes remain affordable in our market, and residential real estate remains a solid, stable investment for families.
Why the market continues to remain robust for sellers and tough for buyers
There are several factors contributing to this lingering inventory shortage, particularly among homes under $300k and for first-time homebuyers. The biggest reason is that builders are finding the costs of new construction to be prohibitive for a number of reasons.
1. Cost of materials
The cost of building materials has been a huge factor in the residential construction slowdown. The materials market, however, is showing some signs of potential relief on the horizon, with gypsum prices down since they peaked in 2018 and the overall price of materials used in residential construction dropping half a percent early this year, according to the Bureau of Labor Statistics and the National Association of Home Builders. Pricing for residential construction goods increased 1.6% overall last year.
2. Continuing labor shortage
Rising labor costs continue to push home construction costs up, and analysts point to this factor as a primary reason for rising building costs throughout our market and the rest of the country. As the labor shortage continues and demand for qualified construction workers lingers, this trend is not expected to abate anytime soon.
3. Land pricing
Land also continues to command a premium price as there is a lingering shortage of land suitable for construction in many cities. This has an impact on the overall cost of new construction, and poses challenges in particular for first-time homebuyers.
For many buyers, the tough market has meant delaying purchasing a home for now and revisiting their options later. For others, it has meant paying a bit more for the home of their dreams.
What lies ahead in residential real estate
Some real estate brokers are seeing a slowdown in price increases, which could signal a small shift in the market and may lead to more favorable conditions for buyers, possibly as soon as 2020. But in the meantime, there appears to be no end in sight to the inventory shortage.
In a challenging market, it’s essential to have the right Realtor on your side to help you get a leg up on other buyers when the ideal property becomes available. Contact us for more information about how our real estate experts can help you during these times of tight housing inventory.