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THE WAITING GAME IS A LOSING GAME!

Monday, August 23, 2021   /   by Dave Salzman

THE WAITING GAME IS A LOSING GAME!

Thinking of waiting to purchase a home until “Prices come down”?

It seems quite clear that a decline in housing prices is not likely in the foreseeable future. Unlike the prior home price downturn, which was driven by easy money given to those who could never actually pay it back, the last ten years of lending have been solely to those that can and do pay. Large numbers of distressed owners and properties ARE NOT coming to the market anytime soon! And the trajectory of prices is clearly going up much faster than most people can save money.


So, for new or move-up home buyers:

THE WAITING GAME IS A LOSING GAME!

WHY?


Three reasons:


UNDERBUILDING


The US has built 276,000 fewer homes each year from 2001 to 2020 than the number built each year in the period from 1968 to 2000. As a result, there are today between 5 million and 6.8 million fewer homes available than would have been if the pace had been maintained. This shortfall and an increasing population have created an unprecedented imbalance between supply and demand, which has resulted in too many buyers chasing too few homes-impacting prices dramatically!


DEMOGRAPHICS


The Millennial generation is the largest generational cohort in US history, they are entering the prime age for family formation which leads to home purchases and an increase in demand. Meanwhile, the second-largest generational cohort in US history, the Boomers, are living much longer than prior generations and many are choosing to age in place so are not selling at the rate of prior generations, causing a shortfall of homes available. This is another significant contributing factor to the imbalance of supply and demand.


AFFORDABILITY


The lowest home loan interest rates in a generation or more are making a larger portion of the population able to be home buyers as, despite higher purchase prices, payments are more affordable than they have been in a very long time. Better affordability yields more buyers, and more of them are able to “pay up to get in” driving prices up in an already undersupplied and over-demanded market.


Conclusion


This large imbalance between supply and demand will continue to drive prices higher. According to the National Association of Realtors (NAR), 99% of areas in the US experienced increases in home values and 94% saw double-digit increases in the past year, many areas over 20%! Lead time to create new housing is years, even many years, and there are significant barriers to new development in many areas, so the shortage will continue for some time. The wave of maturing Millennial buyers will not go away anytime soon, creating even more demand. Interest rates are historically low and will someday go up again, impacting affordability. However, the oversupply of demand, the undersupply of housing, and the massive equity gains of current homeowners will offset declines in affordability such that prices will continue to rise, perhaps not at the current blistering pace, but certainly up for years to come.


So, for new or move-up home buyers:


THE WAITING GAME IS A LOSING GAME!


Let us show you how to get on the home equity escalator!


 

Salzman Real Estate Team ENGEL & VÖLKERS • LA - South Bay
Dave Salzman
1147 Highland Ave
Manhattan Beach, CA 90266
310-871-5314
310-545-2260
DRE# CalBRE#: 00952732

Based on information from California Regional Multiple Listing Service, Inc. as of September 24, 2021. This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.
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