Why Has It Become Difficult to Purchase a House Right Now?
In the past year, while many sectors of society struggled to survive the pandemic, housing became very busy. Despite the mass unemployment and the lockdowns that limited movement across the country, many people were in the market for a home of their own.
The decline in interest rates of mortgages enabled many people to invest in real estate property. Suddenly, more households can afford to leave the renter’s life and pursue their dreams of becoming homeowners.
There was just one problem. There was a shortage of available houses for sale.
Various factors affected the supply of homes in the past year. Many homeowners paused plans to sell their respective properties in fear that welcoming strangers into their houses and moving across the country will expose their families to the rapidly spreading virus. Coupled by the increased demand for houses in the past year, the U.S. experienced a record low housing supply.
Fewer Houses in 2021
The pandemic is winding to a close in the U.S. States are already loosening restrictions, even allowing people who have received both doses of the vaccine not to wear a mask in outdoor settings. There is also more freedom of movement now. Shops have reopened. Restaurants welcome dine-in patrons again. Life is steadily going back to normal.
Yet, the housing situation is worse than last year. According to reports, there are fewer houses available for sale right now compared to last spring. And, it is not happening exclusively in the U.S. New Zealand is also experiencing the same trend. If you check buy-and-sell properties online, you still will see listings, but the number is dwindling. In addition, because of the short supply, the cost of owning a house continues to go up.
In the case of the U.S., which was one of the worst hits by the pandemic, many Americans stayed put. Seniors who were supposed to move to a nursing facility did not. Those who were supposed to upgrade their starter homes to a much bigger house postponed their plans.
However, the housing problem has been building up for years.
Fewer Houses Being Built
Since the crash more than a year ago, fewer houses have been built compared to historical averages. The housing crisis more than a decade ago decimated the construction industry. It left workers unemployed, and they were forced to take up other jobs. The strict immigration policies from the last four years also led to the scarcity of labourers. In addition, the tariffs imposed by the previous administration also caused the cost of building supplies to skyrocket.
Even before the pandemic, experts in the industry have feared a massive housing shortage.
Property as Investment
Moreover, interest rates of mortgages have been relatively low in the past decade. It plunged to historical levels last year, but it has been favourable compared to the rate back in the 70s.
People took advantage of it. When they moved to a larger home to accommodate their growing families, they did not sell their starter house. They kept it as an investment.
In the age of Airbnb, having a second house for renting, whether for a short-term stay or long-term, is an advantage. Homeowners earn a passive income from their properties in addition to their jobs. The vast majority of single-family rentals are currently owned by individuals. It proves that people are holding on to the properties as an additional source of money.
Is a Housing Bubble About to Burst?
Since the past year, many have been asking if the housing sector is about to enter a crash for the second time within the past two decades. In April 2021, Google reported an increase in queries relating to a potential housing market crash. The queries about how many houses are being sold in 2021 also significantly increased in the same month.
While nearly half of all houses are being sold for more than the asking price, experts do not expect things to worsen.
Because of the rising cost of real estate properties across the country, the number of people applying for a mortgage has decreased. Despite the low mortgage rates, some people are giving up the plan to buy a house right now due to the lack of affordable homes in the market.
This, according to experts, is a sign that no bubble is about to burst.
Moreover, builders are back to work, and they are increasing the production of new houses. As the economy stirs back to life, fears of a housing crash can be dashed off for now.
There is a shortage of housing in the U.S. and many nations around the world, a problem that has been brewing for years before the pandemic. While it will take a while to correct, things are looking up right now. At least for the U.S., the possibility of a housing crisis is far from happening.