Supply Side Tempers Housing Outlook
What is happening in the real estate market and why do we care?
We are always curious at TZ headquarters. I think it’s part of what makes us expert recruiters. We are not interested in a canned response. We want authentic answers, and yes, there will always be a follow-up question from us. Why? Because we listen. Because we are interested.
We want to know what makes you tick and where you will be a good fit. We want to know how things work. Asking questions is how we make things work.
We have been in the industry for more than two decades, and while we know more than a thing or two about hiring in the construction and home improvement market – what we want you to know is that we always go beyond the headline.
A statistic is more than a number and can change drastically when given context. The world turned upside last year and the ramifications of that will last for a long time. There are a lot of attention-grabbing headlines so when we see stories about how the supply side has tempered the 2021 housing outlook we want to know more.
We want to know more because we see that everything is connected. And if we are going to connect you with the right people, we need to always see the big picture.
Record highs: Costs up – supplies down
We talked a little bit about this in a previous blog – Three Construction Industry Trends in 2021 – and the impact on single family and residential construction across the board.
Joe Tyrrell, president, ICE Mortgage Technology said in this article: In addition to record-breaking volume for refinance and purchases, there has been an increase in relocations, as people are shifting away from metropolitan areas to more rural ones. We will likely see borrowers invest more in their houses and choose home locations in places that fit their lifestyles, versus the need to be close to offices or particular schools.
Rising materials cost and lack of land are also impacting consumer and builder confidence. Construction companies are reporting labor shortages. With the rise in home prices, and drop in mortgage rates construction simply cannot keep up with the demand.
The housing market is still far from normal, with inventories down over 38% year over year it’s at historic lows.
This quote from NAHB Chief Economist Robert Dietz sums it up perfectly: “While housing continues to help lead the economy forward, limited inventory is constraining more robust growth. “A shortage of buildable lots is making it difficult to meet strong demand and rising material prices are far outpacing increases in home prices, which in turn is harming housing affordability.”
In 2020, more existing homes were sold than in any other year since 2006
Why does that matter? At TZ we look at the entire story – for example what is also worth noting is this from The National Association of Realtors when they released research from the Rosen Consulting Group, estimating that between 5.5 million and 6.8 million new houses are needed to meet the demand.
This article from Zillow also gives great insight into the anticipated inventory relief and what ‘failed’.
How people buy has changed too
The way people buy and sell houses is evolving. Elana Knoller, Better.com chief product officer is quoted in this article stating: Homeowners and the housing industry at-large will utilize technology even more next year to engage buyers and execute deals. 2020 changed the game in everything from touring properties to looking for and locking-in rates, and participating in secure eClosings.
At TZ we are keeping an eye on other factors too – including the potential impact of distressed homeowners who despite the low mortgage rates are still in over their heads, and those in careers that have actually been very successfully during the pandemic who now have an increased budget – both of these groups will influence the market.
Affordability in particular for Millennials is also something to watch. David Howard, National Rental Home Council executive director said: That generation is also the least wealthy at a time when the cost of homeownership continues to climb. Millennials’ demand for housing is not going to diminish, but it may just take a little longer to make homeownership a reality.
Forecast for the housing market
Until inventory catches up with demand home prices will continue to rise. Builders not being able to get homes up fast enough is our current reality. However, the interesting thing is that many predict that a seasonality will soon return to the residential market. When mortgage rates rise, buyers will have to contend with the same level of inventory but perhaps within a different budget range.
If it’s time to increase your ‘budget range’ – reach out to us at TZ, we are ready to help you.