Fenny’s Newsletter- How Is The Market?

How is the market?

It was quite “insane” in the spring, which featured multiple offers with no contingencies, offers from buyers who didn’t even physically see the house, and many properties which sold at 10+% above the asking price. Many veteran realtors said that they had never seen a market like this in their 30 year careers! Well, buyers certainly got frustrated, and the market softened slightly in late June and the beginning of July. Whether or not this was because people took vacation (which they had put on hold for 18 months!) or because more buyers decided to just wait a little bit rather than compete given their belief that home mortgage rates are unlikely to go up significantly during the last half of 2021, there is no denying that the market “calmed” down a little. So, if you are actively looking, please don’t wait: this summer vacation time could be your best chance to find a good deal!

What’s going on with building materials?

All building materials, not just lumber, experienced a price increase and are still experiencing shortage in many, such as appliances. Fortunately, lumber prices have dropped about 40 percent from their May 2021 peak. But even so, the cost of lumber is still up 175 percent from where it was at early last year.

What on earth happened and what is currently going on? Many mills simply went offline when the pandemic started, and then only reopened gradually. Indeed, the main reason that lumber prices are starting to (slowly) come back down to earth is because the mills are mostly back up and running at full steam again. However, prices remain elevated because demand is still through the roof.

So, why demand is still so high?  This leads to my second topic in this newsletter: Builders are building more! ….

The root cause of the inventory crisis dates back more than a decade

The US has been underbuilding for more than a decade, according to a new analysis by the National Association of Realtors. Without a solution, it will become increasly difficult to obtain homeownership.

According to a report released recently by the National Association of Realtors (NAR) the rate of housing production in the U.S. has slowed over the past two decades. From 2001 to 2020, an annual average of 1.225 million new units were being built, down 18% from the annual average of 1.5 million between 1968 and 2000. When the housing market boomed last year, the supply shortage became severe. Thus, while the pandemic,  buyer interest as a result of low mortgage rates, slowed construction and a pull back by sellers over the last eighteen months have all contributed to the housing shortage, they are not the only catalysts. The NAR report states that “[f]ollowing decades of underbuilding and underinvestment, the state of our national housing stock, which is among the most critical pieces of that infrastructure, is dire, with a chronic shortage of affordable and available homes  to house the nation’s population.”

Developers are betting big on these 10 housing markets:

Sarasota, Florida
Average price-per-square foot increase: 92% / Median price per square foot for land: $2.52

Portland, Oregon
Average price-per-square foot increase: 72% / Median price per square foot for land: $9.17

Los Angeles, California
Average price-per-square foot increase: 67% /Median price per square foot for land: $1.38

Boise City, Idaho
Average price-per-square foot increase: 52% / Median price per square foot for land: $3.06

Raleigh, North Carolina
Average price-per-square foot increase: 50% / Median price per square foot for land: $1.71

Syracuse, New York
Average price-per-square foot increase: 50% / Median price per square foot for land: $0.40

Spokane, Washington
Average price-per-square foot increase: 47% / Median price per square foot for land: $0.43

Chattanooga, Tennessee
Average price-per-square foot increase: 41% / Median price per square foot for land: $0.72

Birmingham, Alabama
Average price-per-square foot increase: 36% / Median price per square foot for land: $0.80

Philadelphia, Pennsylvania
Average price-per-square foot increase: 35% / Median price per square foot for land: $6.14