RE:RE:RE:30-Year Fixed Rate Mortgage Highest in 2 Years right now Why Is Housing Inventory So Low?
A few key factors play a part in low inventory. COVID-19 forced a lot of lifestyle changes and historically low interest rates had home buyers and sellers in a frenzy.
One of the largest contributing factors was record low mortgage rates.
In the last year, mortgage interest rates averaged 3.11% for a 30-year fixed-rate mortgage, which is lower than 2019’s average of 4.75%. Many existing homeowners took advantage of the dip in interest rates and refinanced their home with plans to stay put in their existing home.
As time progressed, some homeowners were given the choice to work remotely on a permanent basis. Many families chose to relocate to more affordable communities with more variety in housing options, land, space and proximity to family and friends. Small suburban communities saw an increase in population.
These “zoom towns,” once considered commuter towns, are experiencing their own inventory shortages because of the influx of remote workers coming into the area with hefty down payments and the ability to pay over the asking price for homes.
Another major factor contributing to low inventory is lack of new builds. New construction plays a vital role in the number of homes that are sold in a year. Builders have struggled with unstable building supply costs and a lack of skilled tradespeople to build new homes. Permits for new builds were behind by 24% in 2020.
The lack of consistency in building supplies and skilled workers made it near impossible to make a profit on entry-level new home sales.
How Long Will The Housing Shortage Last?
We have seen housing inventory shortages before. A shortage occurs when there is only a 6-month housing supply. It typically takes 4 – 6 months to rebuild the real estate market supply.
However, it will take years before we know the damage done to the housing market caused by COVID-19.
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