Have trouble finding your dream home? It is safer than ever to say you are not alone. On December 1st, Redfin reported that the United States hit an all-time low in housing inventory. Today’s supply issues have been a long time in the making though.
Not Enough New Homes Being Built
Increased regulation, supply chain issues, and a labor shortage have caused builders to significantly scale back the number of homes being completed. Some issues are more recent, but the lack of homes being completed has been woefully under average since the Great Recession. The graph below from the US Census Bureau shows the steep decline in home construction after the economic downturn in 2008.
Jason Hartman, real estate investor and entrepreneur, explains that builders have been completing 500,000 fewer housing units each year than they were before the 2008 collapse. Freddie Mac says this slowdown in construction has caused the U.S. to be underbuilt by around 3.8 million homes.
For builders to close that gap within the next 10 years, the NAR estimates builders would need to significantly ramp up the number of new homes being completed each year to 2 million. That would require 700,000 more units than 2020, which was less than 1.3 million units completed.
High Demand from Millennial Generation
Before the pandemic increased the availability of remote work options, the millennial generation was already expected to drive strong demand for homes. The peak of the millennial population had just begun entering prime home-buying age according to this chart from the U.S. Census Bureau.
Millennials are now the largest portion of today’s homebuyers and will drive strong demand for years to come. Realtor.com says over 45 million millennials will reach prime home-buying ages of 26 to 35 in 2022 and are currently the biggest share of home buyers today.
Fewer homes are being built while the nation’s largest generation is entering their homebuying age. That strong demand and lack of supply have created the uber-competitive market we have today.
Although we have hit a new low in inventory, it is still possible to be a successful home buyer. Be ready when you find your dream home by scheduling a consultation with one of our mortgage advisors. They can get you fully underwritten, so you are prepared the second your new home pops up on the market. Get started by filling out the form below!