Since my separation, I’ve been searching for a modest home that fits my needs. I don’t require anything extravagant or brand new; I simply need enough room for myself and my three children. Ideally, I’m looking for a three-bedroom house with at least one and a half bathrooms, since it often seems that whenever one kid has to go, they all need to as well. Unfortunately, finding this ideal home at a reasonable price has proven to be an extremely challenging task. The market is facing a significant shortage of affordable homes, and many of us are vying for the same few options available.
The pandemic has drawn attention to the already turbulent housing market, but the roots of this shortage can be traced back to 2018, as noted by mortgage lender Freddie Mac. A decline in available homes has been ongoing since the 1980s. Back then, entry-level homes constituted 40% of new builds, typically around 1,400 square feet and featuring two to three bedrooms—exactly what many first-time buyers seek. By 2020, this figure plummeted to just 7%. In the next decade, approximately 45 million Americans will reach the typical first-time homebuyer age of 34-44, joining the 41.8 million actively searching for their ideal starter homes.
Currently, the market is short by around 4 million homes to meet demand, and unless there is a shift in construction trends, this gap is likely to widen.
Why Is There a Decline?
The pandemic has highlighted the existing labor shortage in the construction industry. According to a survey by the Associated General Contractors of America, 81% of construction companies reported difficulties in finding skilled workers. Builders are also facing stricter land use and zoning regulations, limited land availability in urban areas, rising land values, and soaring costs of building materials. The pandemic has exacerbated these issues, pushing lumber prices up by more than 150% and extending wait times for essential supplies. Although conditions are improving, constructing affordable homes is still not financially viable for builders, particularly when costs surpass what first-time buyers can afford.
Supply vs. Demand Dynamics
The Federal Housing Agency reports that the median price per acre of land for single-family homes increased from $159,800 in 2012 to $203,200 in 2017. Builders must balance the expenses associated with land and construction materials, and unfortunately, buyers are feeling the financial strain. This is one reason why the prices of these homes are exceeding their actual value.
Additionally, record-low mortgage rates are enticing more buyers into the market, maintaining strong purchasing power amid rising home prices. Financing a new home can be very affordable—if you can manage the down payment and outbid numerous competitors. This influx is intensifying an already strained market. With many people either working from home or choosing to do so, the desire for spacious living has grown, making the need for a suitable home even more pressing.
During this period, home sales have increased, but available inventory remains significantly lower than what is needed. Basic economics dictates that high demand amidst low supply drives home prices up, leading to bidding wars and buyers waiving inspections just to secure a property. Recently, I’ve heard numerous accounts of individuals losing out on homes simply because someone had the advantage of paying in cash, which sadly isn’t an option for me.
Is There Any Hope?
Where I live, housing prices are beginning to decline, but inventory remains scarce and still out of my price range. I’m attempting to remain patient, but persistence can only take me so far. I’m collaborating with a community land trust organization that assists people in acquiring affordable entry-level homes. While this program is fantastic, I haven’t found a property that suits my needs in the nine months I’ve been part of it. Some reports suggest that inventory may improve towards the end of 2021 and into 2022, but timing and luck will also be significant factors in my search.
Lawrence Smith, the chief economist for the National Association of Realtors, predicts that more homes will become available later this year as COVID-19 vaccinations are distributed and potential sellers feel more comfortable listing their properties. The decreasing number of homeowners in mortgage forbearance should also lead to an increase in inventory. However, the real relief for many will come from the development of new, affordable housing, which remains years away. The demand for entry-level homes is likely to persist for the foreseeable future.
If you’re interested in related topics, check out this post on home insemination kits, which offers valuable insights on a different but equally essential aspect of family planning. You can also find authoritative information on the topic at Intracervical Insemination and Healthline.
Summary:
The ongoing shortage of entry-level homes for first-time buyers, exacerbated by the pandemic, reflects a long-term decline that began in the 1980s. With rising construction costs, labor shortages, and increasing demand, many prospective homeowners are struggling to find affordable options. While there are signs of potential inventory improvements, the need for affordable housing remains critical.