Housing Inventory Shortage: Is It the Right Time To Buy?

California has always been known as a hot housing market, so much so that average home prices are naturally higher than most parts of the country any given year. However, is now the right time to invest in a home with the current housing inventory shortage?

Currently, due to a mix of pandemic supply and millennial demand, the housing market is on a dramatic upswing. The national average for home sales is happening in a record six days. The competition in the market is driving house values up, and buyers don’t seem to mind because of record low rates on mortgages and a desire to achieve a piece of the American dream.

Is It the Right Time To Buy a House?

According to market experts, you do not want to purchase a house in the current market unless you are an investor looking to flip. That’s because buying a home in the current market means investing more money than the house is worth for homebuyers and dwellers.

The housing shortage has created bidding wars on properties; in some cases, realtors have seen houses going for twice the asking price. While the motivation to own a home is strong, it should not supersede ownership’s monetary gain or sacrifice.

What Led to the Current Shortage?

From 2001 to 2020, homebuilders built fewer new homes. According to the National Association of Realtors, the U.S. built as many as 276,000 fewer new homes per year during the last 20 years than through the nearly 40 years preceding it. Additionally, more people remain in their homes for longer, meaning there are fewer existing houses on the market.

The combination of shortages in existing and newly developed houses creates a significant shift in supply and demand. The reduction in new construction over the last 20 years resulted in 5.5 million fewer available houses. When you figure that millennials make up the world’s largest generation, the current housing shortage begins to make sense.

When Is the Right Time To Buy a House?

Is now the right time to buy? For those interested in purchasing a home, many experts recommend waiting at least a year. However, for real estate investors, now is an excellent time for the housing market.

With limited supply and increasing demand, an investor stands to make a healthy profit, especially on rentals, fix-and-flip properties, new construction, and manufactured homes. There has never been a better time finding qualified buyers and renters, with foreclosures only accounting for between 3-4%.

All research points to the demand outweighing the supply for at least the next year. While there is no crystal ball predicting a guarantee in the market re-establishing equilibrium, with the pandemic slowing and people and businesses returning to normal, many indicators point to settling in the housing market over the next 12 months or so.

Homeownership is something most people aspire to, but it’s crucial to make wise financial decisions for yourself and your family. If you are interested in discussing a home purchase in the California area, or the flexibility and health of the current market, contact us for more information.