While low inventory in the housing market isn’t new, it’s a challenge that continues to grow over time. Here’s a look at two reasons why today’s housing supply is low and what that means for you.

1. New Home Construction Fell Behind for Several Years

The graph below shows new home construction for single-family homes over the past five decades, including the long-term average for housing units completed. Builders exceeded that average during the housing bubble (shown in red on the graph). The result was an oversupply of homes on the market, so home values declined. That was one of the factors that led to the housing crash back in 2008.

Since then, the level of new home construction has fallen off. For the last 13 straight years, builders haven’t been able to construct enough homes to meet the historical average (as illustrated in green on the graph). That underbuilding left us with a multi-year inventory deficit going into the pandemic.

2. The Pandemic’s Impact on the Housing Market

Then, when the pandemic hit, it fueled a renewed appreciation and focus on the meaning of home. Having a safe space to live, work, school, and exercise became even more important for Americans throughout the country. So, as mortgage rates dropped to at or below 3%, buyers eagerly entered the market looking to capitalize on those low rates to secure a home that would fulfill their changing needs. At the same time, sellers hesitated to put their houses on the market as concerns about the pandemic mounted.

The result? The number of homes available for sale dropped even further. A recent article from realtor.com explains:

“Last month, the number of home listings dropped 26.8% compared with the same time a year earlier. This meant there were about 177,000 fewer homes listed in what’s already typically a slower month due to the holidays and colder weather. . . .”

What Does All of This Mean for You?

For a buyer, low inventory can be a challenge. You want to find the home of your dreams, and you don’t want to settle. But what if there just aren’t that many homes to choose from?

There is some good news. Experts are projecting more homes will soon become available thanks to sellers re-entering the market. Danielle Hale, Chief Economist at realtor.com, shares this hope, but offers perspective:

“We expect that we’ll start to see a turnaround and inventory will stabilize and start to go up a little bit in 2022. . . . But that means we’re looking at inventory levels of roughly half of what we saw before the pandemic. For buyers, the market is likely to continue to move fast. If you see a home you like, you want to jump on it right away.”

The takeaway:  Basically, inventory is still low, even though more homes are coming. But you shouldn’t put your plans on hold because you’re waiting for those additional houses to hit the market.  Instead, stick with your search and persevere through today’s low inventory. You can find your next home if you’re patient and focused.

We can help! Book a virtual coffee chat with Page here.

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

Unless specified by your loan type or lender (which can differ, as all lenders aren't created equally), it’s typically not required to put 20% down. According to the Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. It may sound surprising, but today, that number is only 13%. And it’s even lower for first-time homebuyers, whose median down payment is only 7% (see graph below):

What Does This Mean for You?

While a down payment of 20% or more does have benefits, the typical buyer is putting far less down. That’s good news for you because it means you could be closer to your homebuying dream than you realize.

There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants. If you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com.

To understand your options, you need to do your homework. This starts with getting in touch with me for some local lender referrals, to find the one that best fits your personality style and financial approach.  

Bottom Line

Remember: a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation and explore your down payment options.

The Average U.S. Homeowner Gained $56,700 in Equity over the Past Year

Your equity is the current value of your home minus what you owe on the loan. So, as home values climb, your equity does too. Right now there aren’t enough homes on the market to meet buyer demand, so bidding wars and multiple offers are driving prices up. This is projected to continue.  

Dr. Frank Nothaft, Chief Economist at CoreLogic, explains it like this:

“Home price growth is the principal driver of home equity creation. The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.”

Curious how your state stacks up against those in other states? Check out the map below to find out the average equity gain for each state through the third quarter of 2021:

How Rising Equity Impacts You

If you’re already a homeowner, equity not only builds your wealth, as part of your overal plan.  It works like this: when you sell your house, the equity you built up comes back to you in the sale. You can use those proceeds to fuel your next move, including putting a non-contingent offer in on a home.  

If you’re thinking about becoming a homeowner, understanding the importance of equity can help you realize why homeownership is a worthwhile goal. It builds your wealth, and is part of your overall lifestyle and financial goals.  

Bottom Line

Whether you’re a current homeowner or you’re ready to become one, it’s important to know how equity works and why it matters. Equity growth is never guaranteed (remember the recession?) but holding off on using your current equity is an important thing to think about, as it shrinks and expands alongside the market.  

We'll do free custom home value analysis for you so you can track  your home's value anytime.  This isn't a Zestimate (Montana is a non-disclosure state, so they don't have access to our sold pricing data).  Just contact us and we'll start working on it for you.

If you sell now, here’s what you can expect:

• Your House Will Stand Out – While recent data shows there are more sellers than usual getting ready to list their homes this winter, there are still more buyers in the market than there are homes for sale. If you sell your house now before more houses are listed, it will get more attention from serious buyers who are eager to find a home.
• Your House Will Likely Get Multiple Offers – When supply is low and demand is high, buyers have to compete with each other for a limited number of homes. The latest Realtors Confidence Index from the National Association of Realtors (NAR) shows sellers are getting an average of 3.6 offers in today’s market.
• Your House Should Sell Quickly – According to the same report from NAR, homes are selling in an average of just 18 days. As a seller, that's great news for you if you’re looking for a quick process.

Win When You Move

In addition to these great perks, you’ll also win big on your next move if you sell now. CoreLogic reports homeowners gained an average of $51,500 in equity over the past year. This wealth boost is the result of buyer competition driving home prices up. You can leverage that equity to fuel a move, before mortgage rates and home prices climb higher. To get a feel for how rates are projected to rise, see the chart below.The longer you wait to make your move, the more it will cost you down the road. As mortgage rates rise, even modestly, it will impact your monthly payment when you purchase your next home. Waiting just a few months to make that change could mean a long-term financial impact.

The good news is today’s rates are still hovering in a historically low range. According to Doug Duncan, Senior VP and Chief Economist at Fannie Mae:

“Right now, we forecast mortgage rates to average 3.3 percent in 2022, which, though slightly higher than 2020 and 2021, by historical standards remains extremely low . . .”

Selling before rates climb higher means you can make your move and lock in a low rate on the mortgage for your next home. This helps you get more home for your money and keeps your payments down too.

Selling Can Be Better Than Refinancing

With equity (amount you will net) on the rise, selling often makes much more sense than refinancing.  Once you add in the origination fees, prepaids such as taxes and insurance, Title or Attorney fees and other add-ons, it can take years to recoup those costs.  If you don't love your home, why start the clock at zero again?

Bottom Line

As a homeowner, you have a great opportunity to get the best of both worlds this season. You can truly win when you sell and when you buy. If you’re thinking about making a move, let's connect so you have the information you need to get the process started.

The game of chess can provide incredible lessons to apply to all aspects of life, including the homebuying process. (Hint: Finding a home online and calling any agent for a showing is not part of a successful strategy). Chess requires you to plan and think about your strategy from the very beginning of the game.

The homebuying process, like chess, requires strategy and planning. Here are a few things to keep in mind to ensure your plan is as strong as possible when you begin your home search.

It’s important to have a great opening play when you’re buying a home. And the best move you can make when you begin your home search is getting pre-approved by a lender. You’ve probably already heard this is an important step, but what exactly is pre-approval and what benefits does it provide you?

As Freddie Mac puts it:

“The pre-approval letter from your lender tells you the maximum amount you are qualified to borrow. Getting a pre-approval letter is not a loan guarantee, it simply states how much your lender is willing to lend you. . . .”

And while determining how much you can afford at the start of your search is critical, the pre-approval letter also serves another important purpose. Freddie Mac also notes:

“This pre-approval allows you to look for a home with greater confidence and demonstrates to the seller that you are a serious buyer.”

In the game of chess, a strong opening move signals to your opponent that you’re a serious competitor. As a homebuyer, your pre-approval letter signals to the seller and their agent that you’re a serious, interested buyer.

Bottom Line

Getting a pre-approval letter isn’t just good strategy, it can be game-changing. It allows you to get a full understanding of what you can afford, and it signals to sellers that you’re serious. Let’s connect today to ensure you’re playing chess and being strategic during the home buying process.

As we near the end of the year, most markets are still seeing strong sales, multiple offers and other signs that indicate the seller's market will continue into 2022.   Record-breaking home price appreciation, growing equity, remote work, and competitive mortgage rates are motivating sellers to make a move to sepspecifically address their desired  lifestyle needs. We'll ttalk about what a sellers market actually is later in this post.

Info from realtor.com shows a larger share of homeowners are planning to list their houses this winter. So, that means more homes are about to hit the market, which will lead to more choices for buyers too.

According to George Ratiu, Manager of Economic Research at realtor.com:

"The pandemic has delayed plans for many Americans, and homeowners looking to move on to the next stage of life are no exception. Recent survey data suggests the majority of prospective sellers are actively preparing to enter the market this winter."

If you’re thinking of waiting until the spring to sell your house, know that your neighbors may be one step ahead of you by selling this winter. A big advantage of selling now is that serious buyers are continuing to look through the holiday season.  I encourage you to run some holding numbers, which means adding up the cost of holding your home for another 6-8 months and comparing it to rising home costs in the place where you intend to purchase, whether it's here or in another area.

If you want to stand out from the crowd, this holiday season could be a good time to make sure your house is available for buyers. Here’s why:

Sellers Are Still Firmly in the Driver’s Seat

Historically, a 6-month supply of homes for sale is needed for a normal or neutral market. That level ensures there are enough homes available for active buyers (see graph below):The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows the inventory of houses for sale sits at a 2.4-month supply. This is well below a neutral market.

What Does That Mean for You?

When the supply of homes for sale is very low, it’s much harder for buyers to find a home to purchase. This drives up competition among buyers, who then submit increasingly competitive offers to win out against others in the home search process. As this happens, prices rise and your leverage as a seller rises too, putting you in the best position to negotiate a contract that meets your ideal terms.

And while the low housing supply we're facing won't be solved overnight, sellers should move quickly to maximize their potential. As the data shows, with more prospective sellers planning to list their homes this winter, selling sooner rather than later helps your house rise to the top of a holiday buyer’s wish list so you can close the best possible deal.

Bottom Line

Listing your home over the next few weeks gives you the best chance to be in front of buyers competing for homes this holiday season. Let’s connect today to discuss how you can benefit from today’s sellers’ market.

Read more about this topic:

• What It Means To Be In A Seller's Market
• Should I Update Before I Sell?

Learn more tips in our Seller Intelligence section of the blog.