January 2021 - Housing Starts Hit Highest Pace Since 2006!

Demand for housing seems to have hit a near-frantic level. There are a repeating number of new Buyer-prospects as surely as the sun rises & sets each day. The convergence of a several factors have driven todays’ market.

Single-family housing starts ended 2020 on a high note, rising 12% in December to a 1.338 million unit pace – the highest pace since 2006, according to the Census Bureau.

Prior to the pandemic, telecommuting impacted travel & relocation for skilled positions, as many began to work remotely, thus reducing turnover and driving down inventory. Interest rates hit an all-time low. Once the pandemic hit, the focus on HOME really took front stage:

• People spent more time at home in record numbers, now doing DIY projects or contracting for work, keeping people from moving & driving down inventory.
• HGTV inspired owners & tenants alike, to make improvements; Lowes & Home Depot were packed - driving down inventory.
• Owners were fearful leaving their property; moving seemed out of the question; driving down inventory.
• For several months real estate purchases were being made without any physical inspection; driving down inventory.
• Interest rates have hovered at an all-time low, making property even more affordable than renting – creating greater demand.

That’s up 27.8% from one year ago, a remarkable figure given the economic effects of the COVID-19 pandemic, per industry officials.

BUYERS PERSPECTIVE: HGTV has influenced Buyers as their expectation has become one of purchasing property in very good condition. The competition for these homes are fierce and often goes to the Buyer without a financing contingency or one with a large down payment – as the appraisal issue then becomes moot. For low-priced homes (under $250,000), Buyers compete directly with investors/rehabbers, who squeeze out potential owner-occupants by delivering “as is” offers – free of financing and inspection contingencies – thus becoming more attractive to Sellers.

SELLERS PERSPECTIVE:  Owners have three wonderful options:

1. Improve the property to meet the desires of today’s Buyers, much like professional rehabbers do, and “set a new record sale price” for similar area homes.
2. Correct the obvious defects and sell for what was recently regarded as high neighborhood value.
3. Clean up the property and sell “as is,” leaving no room for Buyers’ sweat-equity; for example, a fully-improved home that would sell for $350,000, but requiring $100,000 of repairs would normally sell for around $200,000, now would sell for $250,000, leaving no sweat-equity for the Buyers – just a customized finish.

“2020 will go down, quite unexpectedly, as one of the best years for home builders in recent memory, and proof that great challenges — and not just those posed by COVID — can be overcome with hard work and creativity,” said Matthew Speakman, Zillow economist. “Demand for homes remains sky high, despite the still-raging pandemic, as people look to take advantage of historically low mortgage rates and find their next home.“