The housing market’s new norm is tainted with soaring prices, bidding wars, and shortages of just about everything. A collision of pandemic-related problems is holding back new inventory just when demand is at its highest. Builders’ jobs have gone from trying to sell homes to trying to build homes.
Construction companies and home builders are facing delays for everything from steel and sheet rock to cabinets and kitchen appliances. As a result, homes are taking longer to build, and home prices, already reaching unaffordable levels for many Americans, are set to keep rising.
Frenzied demand paired with climbing construction costs are overwhelming builders and many are suppressing orders and shifting away from fixed prices. Some smaller firms have stopped signing contracts altogether because they don’t have the bandwidth to follow through with locked in fee structures.
About 19% of builders are delaying sales or construction and 47% have adjusted by adding escalation clauses into contracts. This allows them to lift prices accordingly as costs increase, which helps in slowing sales as buyers are deterred by rising costs as well as terminating their sales agreements with buyers, if they feel it is warranted.
With so many motivated buyers in the market, multiple people end up bidding on the same house, which triggers price increases. Affordability issues then naturally arise.
Despite the many roadblocks homebuilders face going into the new year, economists are cautiously optimistic about 2021. Even though home prices have ballooned considerably, the demand for houses has matched it. Millennials, who make up approximately 38% of the homebuyers’ share – are getting married, having children and looking for a home – either their first or second.
If you are interested in finding out more about how the current home prices are impacting your ability to qualify for a mortgage loan, please reach out to us at (760) 930-0569 as we will be happy to help answer any questions about this.