This week I heard that “UNPRECEDENTED” word again…
Monday morning my phone rang. It was the listing agent of the new construction home my clients had been under contract on for almost 2 months with a close date of less than a month away. The agent started out, “In my 25 years of being in this business, this is unprecedented…” My response, “What is it?” He went on to explain that he was calling me because the builder notified him that they cannot sell the new construction at the agreed upon sales price due to the escalating costs of materials. In order to remain solvent in 2021, the builder was raising the price of the home $50,000.
That is NOT the kind of news you look forward to delivering to your clients from AZ who have their home under contract and are arriving in Portland on May 21st excited to move into their new home.
The unprecedented housing shortage has created an environment where practicing real estate feels like being the driver in the Daytona 500 daily, all day. Only the skilled survive and win.
What is Driving the Housing Shortage?
A History of Radically Underbuilding: According to Jeff Tucker, Senior Economist at Zillow, “Since 2007, we were radically underbuilding, especially single-family homes.” The Great Recession put a halt to building due to financing issues and lack of demand. This has been perpetuated by a shortage of labor from migrant and immigrant workers.
The Demographic Shift: Danielle Hale, chief economist at Realtor.com, pointed out that “millennials are the largest generation since the baby boomers and have been gradually hitting homebuying age in recent years. That trend is peaking right now” creating unprecedented demand.
The Corona Pandemic: The pandemic has fueled interest in owner-occupied homes as people want more space and are migrating out of cities. As demand increases, sellers have been more hesitant to sell for fear of not finding a replacement home or not wanting exposure during the pandemic. Simultaneously, those who fared well economically during the pandemic have saved even more money for that down payment.
Historically Low Interest Rates: Interest rates remain at historic lows incentivizing buyers to enter the housing market. There is a mentality of just not wanting to miss out.
Lumber Costs Skyrocketing: According to an article in MarketPlace, the cost of lumber (the key building material) increased 400% over the past year! Hence my unprecedented phone call…
Despite the challenges, each day I observe my Buyers and Sellers negotiate this market successfully. You definitely want to wear your seat belt and be ready to step on the gas full throttle, but the ride can be very rewarding. One week after “the call,” my AZ Buyers are under contract again. They are scheduled to close May 25th. Ride On!!!
