Inventory Issues in 2017
As the majority of buyers in the housing market are aware, the lack of inventory is putting a damper on a buyer’s home search. As stated in the previous blog Housing Forecast for 2017, the issue will only continue throughout the year. Low interest rates and the unleashing of pent up demand has gobbled up a large portion of active listings. The purchaser’s who were not on the front end of this surge and left feeling frustrated and exhausted. If you are ready to throw in the towel, here’s a few options to explore.
Fortunately, the new construction industry isn’t halting any time soon. They are working to build new homes as quickly as they can. So although the resale market is seeing a shortage, new construction is hoping to slide in and relieve some of that pressure by building their own inventory. New builds will continue to grow in 2017 in lieu of resale shortages. If you are searching for a home and just can’t seem to find exactly what you want (or can place a bid on it quick enough), don’t settle. Be sure to chat with your real estate agent about what new construction opportunities may exist. Certainly in the more metropolitan areas land will be at a premium but there may still be some demolished homes that are being reconstructed. This may be a great alternative and will give you the ability to customize your dream home!
Perhaps you can’t find a new construction neighborhood? No worries, many builders have developed plans to be more nimble in the market by offering “build on your lot” options. What this means to buyers is that you don’t necessarily have to be a part of their community to have that specific builder build your home. Some builders can help you find the piece of land that works and allow you to purchase it and some may even purchase the land on your behalf and then build. You may also be able to track down an old piece of family land and then find a builder who best fits your tastes/preferences. Many people enjoy having this option if you do not like the location or the community itself. Be sure to ask your realtor or builder if there is a “build on your own lot” option!
Should you become more interested in building a custom home, make sure your realtor thoroughly explains the drawbacks to building vs. resale. The new construction process can be lengthy and riddled with highs and lows. Traditionally, you may want to allow for about 6-8 months for the build process to come to completion. If the builder provides you with an estimated time of delivery, you may want to conservatively anticipate that it could be delayed. Be sure that your lender explains the significance of when to lock in your rate so you can avoid rate lock issues and extension fees. Also, make sure your agent has explained the closing process of new construction. If you are utilizing a construction loan vs a conventional mortgage there will be other nuances that you’ll need to learn about. And again, keep in mind that completion is a moving target; make sure you understand all of the building steps and timelines.
Although new construction is a great alternative to resale purchases, unfortunately new construction opportunities may be too costly for first time homebuyers. Many millennials simply cannot afford the new construction premium and the extra amenities many new communities are offering. The best advice for those buyers is to keep saving for a larger down payment and closing costs. If we continue to see multiple offer situations, the cleaner the offer the more appealing your purchase agreement – read on for more tips to win multiple offer situations. And learn a few more ways of saving for a down payment.
One last creative idea is to be sure that you are working with an active real estate agent in the market of your choice. Every market typically has a ton of real estate agents but not all real estate agents sell at a high volume. The agents who do sell a lot in the area will likely have connections and referral sources to sellers who are thinking about selling shortly. They may just be able to arrange for a showing on a pre-market listing. The more you work with your agent and the more you tell him what you like and don’t like, the better they’ll be able to keep their eyes peeled for the perfect house.
Yes, the housing inventory is low. Yes, it’s seeming that it will remain low for the foreseeable future. BUT, you still have options. Keep searching, keep trusting your real estate agent, chat about new construction, expand your search for land, ask about pre-market listings, and make sure you explore all your options before getting too discouraged in this inventory predicament! And just remember there may not be a perfect house but you can make any home perfect!