Are you stuck in the Real Estate “Catch 2022”?
Some common issues you may be having include:
Losing out on properties because you can’t compete with cash offers?
Offer getting overlooked because it is a non-Cash or non-Conventional loan offer?
Need to sell your current home to buy a new one, but find that Sellers won’t consider offers with Home Sale Contingencies?
Considering a “hassle-free” cash offer from an iBuyer but finding their cash offers are too low and loaded with excessive fees?
Tired of renting but still working on getting qualified for a mortgage?
So what’s causing all these home buying and selling issues? There are many factors at play, and there are no quick fixes to the issue. It will likely continue for many years to come. Here’s why we are where we are.
Culprit #1 – New Construction
Since 2018, the real estate market has been dramatically shifting and price increases have been accelerating faster than anyone imagined would happen. After the Great Recession of 2008-09, when many builders lost their businesses and a large portion of construction subcontractors went back to Mexico and their Central/South American countries due to loss of work, the construction of new homes dramatically declined. This decline has been ongoing since the 1970s, but when the economy went bust, so did most of the homebuilders who were already overextended. The available home shortage accelerated in relation to the demand for houses.
Culprit #2 – Resales
As the “Greatest Generation” has aged, fewer people are choosing to down-size their homes or move to retirement communities. These are people who lived through the Great Depression and highly value all that they accomplished following the collapse of the US economy in the early 1900s. Those who overcame the odds have been choosing to stay in their homes, where they raised their families, rather than selling and downsizing or moving into retirement communities. The high costs associated with these retirement options may also be lending to the decisions they make. This is a huge blow to the resale segment of the home market, further exacerbating the available home shortage
Culprit #3 – Demand
While the real estate industry was acknowledging the housing shortage from both new construction and lack of resale inventory, the “Millennial Generation” hit the market with the greatest demand since the appetite of “Baby Boomers” catapulted the economy forward with a buying frenzy. However, the “Millennial Generation” is the largest generation to date, with a far greater impact on the economy, and they’ve all evolved to the age of becoming homeowners. This resulted in the largest increase of demand for housing, while already at the lowest levels of available inventory.
Culprit #4 – COVID
In 2019, the world was introduced to the COVID virus, which forever changed the world as we knew it. As the virus spread, illness and death rose and impacted every corner of the globe. People had to stay home from work and social events to prevent exposure while the world’s medical establishment investigated how to combat COVID effectively. Raw material harvesting ceased operations. Manufacturing ground to a halt. Shipping operations disappeared. The world’s economy suddenly applied the emergency brake and came to a stop. Once the experts figured out how to move forward with safety precautions and vaccines made available to workers, things began to slowly restart. However, throughout the 20th century, the manufacturing process dramatically changed from local suppliers to international ones. In addition, Henry Ford’s early 20th-century concept of “just in time” supply chain delivery had become the standard, where large stockpiles and warehouses of materials and finished goods were eliminated to reduce huge overhead costs, it wasn’t as simple as starting again. The manufacturing process has morphed over time into an art form of precision creation and delivery of supplies from every corner of the planet. No longer could one simply pop over to an alternate supplier and supplement parts to continue the process. As COVID struck different locations at various intensities, and with various levels of impact, foreign suppliers and manufacturers couldn’t get synchronized with the international shipping companies. The various port authorities couldn’t synchronize their available labor with the ground shipping, storage operations, and the timelines of arriving and departing ships. The entire world economy was severely impacted and inflation took off as demand for goods roared back to pre-COVID levels while the manufacturing process was still in shambles. With so many in the workforce now working remotely, rather than going into an office, the demand for housing grew even more.
Culprit #5 – Interest Rates
Remember the 2008-09 Great Recession and the impact on the economy? Governments around the world stepped in to lower interest rates to make it more appealing for companies to borrow money rather than rely on spending their own money. This caused a demand for lending and the economy stopped falling and began to climb back out of the recession hole. One of the results of this move, and the ongoing management of these main rates by governments, has been the passing on of cheap loans to everyone. Lenders dropped their rates to historic lows never seen before, to entice buyers to buy everything and further stabilize the economy. With mortgage interest rates so low, everyone that wanted to buy a house started buying. Demand shot to the sky. Unfortunately, available inventory is barely improving and will take years to recover to match demand.
So what now? What’s can you do to improve the house buying odds in your favor.
The result has been the creation of programs for buyers and sellers to help improve their odds of winning the bid and getting into that home they desire. The use of these programs is growing, but it hasn’t become a standard yet. However, until the market can improve to a point that looks like before the above events took place, it is likely that you will need to use one or more of these to be successful in your real estate buying and selling needs. Important to note, these programs all have associated costs and success rates, and not every real estate agent knows of them or is approved to use them. We at the Westside Property Team – Coldwell Banker work with each of them and are happy to discuss them with you to help assess your needs and how we can help.
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