Today is brought to you by the number 1,751. That is the number of homes that are currently listed on the MLS (multiple listing service) as of this morning. That is a new record low. A few years ago, that number would have been closer to 8,750. This could be categorized as a housing crisis. I recently ran across a meme (a humorous image, video, piece of text, etc., that is copied and spread rapidly by internet users) which showed a real estate agent talking to a couple of clients. The caption read, “Or if you want something more expensive, I can show you this again tomorrow.” It would be funny if it weren’t so true.
As a result of the “crisis,” I hear a fair number of people who have declared aloud that they are going to wait until the market softens to make a move. Don’t hold your breath. According to the most accurate real estate analytic groups, there are specific factors driving these current conditions that are not going to change anytime soon. And although Utah is one of the hardest hit, it is happening, at some level, nationwide. Currently, the total national inventory is down to one-third of the normal level. This does not count the properties that go under contract within hours of listing as well, which is a very high percentage of sales. Only the patient and proactive homebuyer, with strong financing in place and some cash in hand, armed with an aggressive, experienced Realtor will stand a chance in this market.
We shouldn’t act surprised (we, in the industry). This market didn’t just happen. It’s been in the works for a few years. We have had historically low interest rates for a long period of time. Cheap money contributes to high demand as well as low supply. Couple that with the high need for rentals as well, and that equates to people keeping their first home as an investment and moving into a new home. Rents are high and positive cash flow is a tempting motivator. Although we have seen interest rates slowly creeping up, we likely won’t see a sharp increase for some time.
Somewhere between our majestic mountains on the east bench and our resplendent mountains on the west horizon lies that area in which housing units can be erected. That area is full. We have built on nearly every parcel, particle and speck of land that is available and we keep looking to the sky for more land to magically appear. In a way, that is where we should be looking. Building up and not out is one answer to an inherently bigger problem. It is a reluctant step in the search for a solution.
New home construction is critical to the solution, but a need for land paralyzes builders. Although policy shifts are imperative, we need to be deliberate and careful about how these shifts will impact housing long term.
While I have also heard potential buyers talk about waiting for the “foreclosed” properties that are supposed to flood the market once the CARES Act moratorium expires (at the end of this month, unless it is extended again). Again, don’t hold your breath. While the moratorium may have delayed some properties from coming on the market, distressed homeowners have not likely lost any equity in their properties during this time. In fact, most Americans have gained a significant amount of equity in their homes and could likely sell their property for more than what is owed even if the payment has been delayed for several months.
Millennials are also an important factor in the increased need for housing. While baby boomers were abundant for the time, millennials take the cake. There are more millennials than any other generation in history and they are ready to buy. Yet boomers are holding on to their homes longer so there is little to sell. Millennials aren’t even asking for much. Tiny homes, alternate dwelling units and mother-in-law apartments are short-term solutions for many. We just need to have zoning laws that can support these types of structures.
Utah is an incredible state. We have all kinds of recreation, we have beautiful parks and canyons and mountains, we have affordable taxes, we have all four seasons (or at least glimpses of them) and we try to clean up our messes. As a result, everyone wants to live here, and the people who already do don’t want to leave. The kids grow up and want to stay here as well.
For now, as buyers and Realtors, we continue to compete well, work tirelessly, commit to the process and plow forward. May the odds be forever in your favor.