After Hitting a Record Low, Housing Inventory May Be Slow to Rebound
A shortage of available homes has fueled the ultra-hot housing market in recent years, causing prices to soar and demand for homes to increase.
Housing inventory hit a record low in 2021, reflecting “a lack of new construction, [and] surging demand from buyers and homeowners taking advantage of low mortgage rates to refinance rather than sell,” a Redfin blog says. Continue Reading
If you haven’t noticed, Central Indiana has not been immune to the issue of shrinking inventory and limited availability of new construction. Historically, when demand has increased and inventory has struggled to keep up, in swoops new construction to help bring balance to the market.
We are in a unique time that has ushered in a slew of roadblocks to the demand vs inventory discussion. Covid, in addition to inflation, have created both a shortage of materials, which can’t keep up with demand, and as a result, cause prices of materials to go up. But the other challenge that has surfaced, along with the rising price of materials affecting builder’s ability to keep up with demand, is the increasingly limited availability of skilled labor. Builders are currently working as fast as they can, based on availability of labor and materials, however, they’re still years behind in available inventory.
So, if you’re thinking about making a move this year, what options do you have to ensure that you can find suitable housing while there appears to be no balance in sight? New construction, especially building custom is a great option. It does require some planning and patience as many builders are anywhere from 9-18 months out from being able to deliver a finished home. You can also get on a waiting list with semi-custom builders for spec homes they will be building and releasing throughout the year. A spec home is a home where the builder has selected and designed all of the finishes for that home. So, rather than giving the buyer the ability to select finishes, the builder makes those decisions. This allows builders to control the flow of inventory as well as reduce the time from start to finish. Most builders are selecting finishes based on what the general market is looking for, so you can generally expect these homes to have many finishes you will like. Then once you’re moved in, you can customize colors, decor, etc.
In either case, the builder does like to know you are preapproved to buy and have a good portion of the downpayment available at contract signing. If you have a home to sell, they also like to know that either you are approved to purchase without having to sell your home, or if you do have to sell your home, they really like to know you have a buyer, and even more so, they prefer that you are already under contract and will be closing well before the closing of the new home.
So, if you have to sell before closing on a new construction home, what are your options. There are a few. You can list your home, close and then rent for a short time until your new home is ready, or my least favorite option is to use one of the many iBuyer companies available. IBuyers will make you a cash offer for your home, usually under market value with a small fee of usually at least 5% or more and then they will allow you to pick the closing date. Some of them offer other benefits like a free local move or lease back options. My reservations about these companies is that you give up somewhere in the range of 10-15% of the value of your home which equates to a lot of extra money in your pocket. In reality, you would be better off selling your home now and then renting until your new home is complete.
I offer sellers a similar competitive option that still allows you to list and sell your home on the open market which means taking advantage of competing offers and usually they are above asking price. Also, many times you can work into the deal from as few as a couple of days, to as many as a couple of months worth of post closing possession, which may even save you from having to rent after closing, or at least limit your amount of rental time. I offer free local moving as well as 2 nights at a local hotel on the first weekend of listing so the home can remain open to showings for the entire time without you having to worry about keeping the home clean or accepting offers. This gives you the same convenience, but you also get the expertise of a local agent that will ensure you get the best offer and terms, and get to the closing table every time.
If you’re thinking new construction is the right path for your next home, I would love to talk with you about all the options you have, help you find the right builder to fit your needs, then come up with the ideal strategy to list your current home. If you’d like more information about this, you can click to learn more about my Hassle-Free Listing option, or call/email me to start the conversation.