Springtime is upon us, and for many people the thought of moving or building a new home is on their mind. Spring is the traditional time of the year in which families make a home buying decision as the end of the school year approaches and other life decisions like retirement come into focus. It is also the time of the year wherein home builders associations host their parade of homes along with open houses by Realtors to entice prospective buyers who have the new home itch but are not sure if they want to scratch it or not.It is home buying season—are you interested? One thing is for sure—many people may be, but they are hesitant to make a move. According to the National Association of Realtors, prior to the Great Recession (from 2000-2007) the average homeowner sold their home and moved every 4.2 years. Home prices were appreciating, and the mood was always to refinance for a bigger, better home.
Then we had the Great Recession (from 2008 through 2011). It appears every paradigm and norm in the housing industry was obliterated as home values plummeted and millions of people lost their homes. Those who did not lose their home were upside down in them, as they appraised out for less than what their owners owed under their mortgages. To this day, many families have not recovered from losing most of their wealth in the housing meltdown.
After the initial housing market crash in 2008, banks had to unload millions of homes at bargain basement prices. Homes that once sold for $400,000 were sold in a short sale or on the foreclosure steps for $100,000. It was brutal. The only positive during this period was that many homeowners who had the financial wherewithal at that the time were able to get great deals on homes.
Fast forward to 2019 and 2020, and now you have a lot of homeowners who bought homes at bargain basement prices after the crash, who would like to move, but are somewhat locked in their house. The tenure of homeownership has soared to 8.2 years as homeowners realize the price of a new home has escalated so much that the equity, which they gained in their purchase of the bargain basement house, is not enough to buy a new upgraded home. Essentially, if you sell your home today, your new home would be less of a house, and that is not good.
The other big factor is what to do with your adult children. The United States Census Bureau reports that more adult children from the ages of 25 to 34 are living with their parents. The report shows that 20.4 percent of adult male children and 13.1 percent of adult female children still live at home—these numbers are at record levels since the recordkeeping started. Although mom and dad may be at the point in their lives to downsize to something smaller, they cannot do so, because their adult children still need a place to live.
The final factor is affordability. The price of housing in America has soared since the Great Recession, with the median price of a new home increasing to $331,400 in December 2017. Housing costs have outpaced wage growth and we now live in a country in which homeownership is not a viable option for Americans with a median income. The raw cost for housing has escalated so much, especially due to governmental impact fees and building codes, that builders are unable to construct affordable housing. According to a recent housing affordability study conducted by the National Association of Home Builders, only 63 million households—out of 120 million households in America—can afford a home that costs $250,000. Unfortunately, that means most of the country cannot afford to buy a house.
These three factors—the housing hangover from the Great Recession, adult children still living with their parents, and affordable housing—are the primary reasons why housing inventories are so low. While this may be the time of year to buy a new home, good luck in finding one. There is no doubt that this is home buying season and there is a lot of interest in buying a new home. While many people are interested, the reality is that many of them will be left disappointed by the lack of inventory and price they can afford.
Here is one great homebuying tip: if you find a home that you like and can afford, do not flinch—pull the trigger on a contract. There are too many buyers for too few homes.
Don Magruder is the CEO of RoMac Building Supply, and he is also the host of the “Around the House” Television Show, which is hosted weekly on Lake Sumter Television. For more information, go to www.Aroundthehouse.TV.