[vc_row][vc_column][vc_column_text]One of the major questions in today’s market is whether potential homebuyers still believe purchasing a home makes sense. Some experts believe rising home prices are impacting demand and, by default, leading to the recent stall in sales activity.
However, it’s more likely that it’s the lack of supply that is responsible for the stalled activity.
The Wall Street Journal explained that “Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up.”
If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate – but this isn’t the case. As Mark Fleming, Chief Economist for First American, explains:
“There’s a lot of conversation around rising prices and falling quantity in the housing market, and there’s this concept, or this idea, that it’s a demand-side problem . . . . But, if demand were falling dramatically, we would actually see less price pressure, less home price growth.”
Danielle Hale, Chief Economist for realtor.com, also explains that the slowdown in sales is a lack of supply, as opposed to a lack of demand. she notes:
“. . . if these changing inventory dynamics continue, we could see a wave of real estate activity heading into the latter part of the year.”
Instead, we’re seeing price appreciation accelerate throughout this year. There’s a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.
- Owning is a better long-term decision than renting.
A recent study shows renting a home takes up a higher percentage of a household’s income than owning one. While the principal and interest of a monthly mortgage payment remain the same over the lifetime of the loan, rents increase almost every year.
- Affordability isn’t the challenge some are claiming it to be.
Though home prices have risen dramatically, mortgage rates remain low. Because of these record-low rates, monthly mortgage payments are affordable for most buyers.
- Owners build their wealth. Renters build their landlord’s wealth.
Whether you’re a homeowner or an investor, real estate builds wealth through growing equity year-over-year. If you own, your household is gaining the benefit of that wealth accumulation. Odeta Kushi, Deputy Chief Economist at First American, elaborates in a recent article:
“. . . once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets, including the two most expensive rental markets, San Francisco and San Jose, Calif.”
Today, that equity buildup is substantial. The National Association of Realtors (NAR) reports:
“The median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter of 2021 compared to one year ago, with price gains in 94% of markets.”
For many reasons, housing demand is still extremely strong. What we need is more listings to meet that demand. Be sure to connect with an agent today if you’re considering listing your home.
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