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Everyone has seen news clips of Black Friday shoppers screaming for discounted big screen TVs and the season’s most sought-after toys. Not everyone emerges as a winner because there aren’t enough products.
The current real estate market is a bit like Black Friday. High demand, low supply and super cheap mortgages drive the whole company.
In August, home sales soared 4.8% to over 1 million units – the first time since 2006, the Census Bureau reported Thursday. This is the fourth straight month that home sales have risen despite the shaky economy.
Motivated buyers want to benefit from cheap credit as long as it lasts. The average interest rate on a 30-year fixed-rate mortgage is just 2.9%, which is among the lowest ever, according to Freddie Mac’s latest primary mortgage market survey.
But the number of houses for sale is shrinking. The monthly supply of new apartments for sale in August was a seasonally adjusted estimate of 282,000. At the current sales rate, that’s roughly 3.3 months of housing listings, according to the Census Bureau’s latest New Residential Sales report. This is the lowest since the Office began to publish these figures in 1963. For a balanced housing market, inventories should reach the six-month mark, which would prevent home prices from rising rapidly.
This deficiency is also reflected in the real estate offers for sale. According to an analysis by Realtor.com, 97 out of 100 major metropolitan areas have seen double-digit drops in property offers since last year. And only one subway area, Honolulu, is not in the red. There are currently 27.4% more apartments for sale in the state of Aloha than in the previous year.
Subway areas that have taken the greatest hit
Boise, Idaho topped the list for the biggest drop in homes for sale year-over-year, down 67.4% year over year. The reason is overwhelming demand, says Bill Rauer, executive officer of the Building Contractors Association of Southwestern Idaho.
The appetite for real estate in Boise has overwhelmed the infrastructure, says Rauer, which makes it difficult for developers to keep up with the new demand.
California, Oregon, and Washington homebuyers have created a huge supply glut as they flee from expensive homes and high property taxes. In fact, some locals are so frustrated with the soaring prices, traffic, and general changes that newcomers have brought that they are, according to Dan C. Dunmoyer, President and CEO of the California Building Industry Association.
“We have seen a real surge in demand since the pandemic broke out. People in densely populated areas in the west who were already considering moving to Boise were quicker to pull the trigger, ”says Rauer.
Californians are much more likely to shop for Boise homes online this year. Realtor.com reported 361 of 1,000 Boise home views in August, up 23% from 294 last year and 43% more than 253 in March.
The proportion of all views from California home shoppers to Boise houses has also increased significantly. About 68 out of 10,000 homes viewed by California residents were in Boise this August, up 33% from 51 in 10,000 last August and up 66% from 41 in 10,000 in March this year.
Three California subways cracked the top 10 list for the biggest drop in residential property offers in August. Stockton-Lodi (-62.1%), Fresno (-57.3%) and Riverside-San Bernardino-Ontario (-57.1%) also saw massive drops in properties available for sale, according to Realtor.com.
However, unlike Boise, where construction is not hampered by red tape and high taxes, California faces major obstacles, says Dunmoyer of the California Building Industry Association.
For one, the new Vehicle Miles Traveled (VMT) law that went into effect in June has increased construction costs in the Golden State, displacing home builders at a time when California is grappling with a lack of affordable housing. The new fee will be charged for construction projects that are not located in urban centers; These are additional costs that are then passed on to the home buyer.
Construction in California is already tense. The state is notorious for its strict zoning laws, which artificially increase land costs and cut supplies. Because of this, California construction comes from domestic and international companies with deep pockets and complex balance sheets, says Dunmoyer. But even then, if they can build for a third of the cost in Arizona and Nevada and get a higher return on investment, these companies don’t want to take too much risk and pay high fees.
When home builders are billed more, they usually pass those costs on to consumers.
“We find that people who commute a mile away have to pay the same high fees as those who have to commute two hours away under the new VMT legislation,” says Dunmoyer. “Housing has become priceless in California, so you can see the emigration, especially of former civil servants. They take their pension and move to Reno. “