Six Things To Consider When Buying or Building a New Home
According to Mashvisor, “Many people, during the height of the coronavirus pandemic, predicted a housing-induced recession in 2020. In reality, there was an unexpected boom in real estate demand, the likes of which had not occurred since 2006. The fact that the housing sector boomed during a time of short-term hysteria and inflation could be an indicator of how the housing market has evolved.”
This coming year is still running low on inventory and still has buyer’s demand. This year we have seen double-digit home appreciation, low mortgage rates and the growth of the economic confidence index. Here are six factors those that are considering buying a home or building a home should consider.
For Builders: Cost of Construction Should Come Down
The supply chain is still a big part of our problem along with inflation in the manufacturing industry. This has caused a high cost of production for builders. Prices for building materials have risen. Lumber prices add around $36,000 to new home prices.
Fortunately, sources say that supply chain issues are slowly starting to come around. Shipping prices are falling and deliveries are speeding up but there still is an issue with a shortage of truck drivers.
For Buyers: Everything Screams “Buy Now!”
It is definitely a seller’s market with record-high prices and bidding wars galore. In 2021 potential home buyers settled down to wait out the competitive market. Those in the industry predict that if the inventory of new and existing homes rises, this could make for robust demand.
Higher Mortgage Interest Rates Could Dampen Demand
It is predicted that mortgage interest rates will increase in 2022. This increase will slow new mortgage interest. “The 30-year fixed mortgage rate will increase to 3.8% in the fourth quarter of 2022. This would have a stabilizing effect on price growth as the price-inventory problem continues. Freddie Mac predicts that home prices will rise to 4.4% in 2022, while it expects new and existing home sales to reach 7.1 million in 2021 and then decline to 6.7 million homes in 2022, ” according to Freddie Mac.
Not a Lot to Choose From
We can’t create more land, so get it while it is still available. In a recent National Association of Home Builders (NAHB) over half of the home builders report that developed lots are very low.
“Responding to questions in the September 2021 NAHB/Wells Fargo Housing Market Index (HMI) survey, 46% of single-family builders characterized the supply of lots simply as low, and 30% said the supply of lots was very low, for a total of 76% of builders indicating some type of problem with lot supply.”
Home Buyers Will Be More Cautious About Closing the Deal
Buyers are doing almost anything to win the bid in this multi-bidding market. Homes are only on the market for a week or less and the supply chain is hindering new construction homes. Buyers do not have time to think about one of the biggest financial commitments in this fast-moving market. Buyers will give up traditional safeguards in order to win the bidding war. This will change once inventory becomes more prevalent.
Property Values Will Remain High…Or Will They?
Zillow forecast that the annual home value growth will rise to 13.5% and home values will increase 10.5% from where they were. Zillow Economic Research says that sales volume will stay elevated this year. Barring any unforeseen calamities, 2022 could be a good year for homebuilders and buyers. However, the effects of inflation, new COVID variants, or other market disruptions could change everything. As always…caveat emptor. “Let the buyer beware.”
