Do you remember that line from the 80’s Wendy’s fast food commercial? Where’s the beef? I’ve been asking nearly the same thing these past few months in real estate.
Where’s the listings? That’s what all the home buyers are asking right now. It feels like there are very few homes on the market and as soon as a sale sign pops up, it’s already sold.
Why are there so few homes on the market? Believe it or not the number of homes being listed for sale is quite similar to years past. The answer to our real estate ills actually lies on the other side of that equation. What we are experiencing is buyer demand at an all-time high. So, the real question becomes, “what is fueling all the demand?”
The answer is a collision of factors. For starters, it’s obvious that a growing population requires more homes to be built. Millennials can’t live in their parent’s basement forever (or can they?). Remember a builder named Hearthstone? How about Benchmark? Both companies were significant builders in the starter home markets, but are no longer around.
Have you noticed Celebrity Homes, Omaha’s largest and only tract builder, is now building in the mid $200 price point? This is a significant departure from a prior focus on the first-time home buyer market. All this spells disaster for the $150,000 home buyer.
Omaha’s new construction issues don’t rest solely on the shoulders of the builders. West Omaha is no longer 144th St but is out past Elkhorn, nearly to the edge of Douglas county. In general, many Omaha buyers are starting to put the brakes on moving that far west.
Even if a new construction buyer can look past location they are still in for a sticker shock. Not only has the cost of land gone up, but the cost of materials, administrative and labor costs have risen significantly as well. New Construction average sale price rose 17% in the last 12 months. That means the $300,000 house you could have purchased last year is now $351,000.
The natural second choice for a home buyer unable to build would be to look towards established areas like Midtown Omaha and Westside. But, even the here you won’t find relief from high demand. In fact, the lack of inventory at the entry level price point in new construction has pushed the demand in Midtown even higher.
Is every price point experiencing the same demand? Definitely not. First time home buyers are definitely on the losing end of this unprecedented seller’s market. Making matters worse is the increase in rental rates pushing would be renters into the housing market. Why rent when you could buy for essentially the same price?
Another appropriate question might be about the effect of the expected increases in the mortgage interest rates. Will that temper the sky high buyer demand? I hate being the bearer of hard news. Higher interest rates may in fact have the reverse affect. Buyers could get even more anxious to buy before rates take on significant increases all the while potential homeowners will forgo selling because they won’t want to lose their 3 percent interest rate.
All I can say to today’s home buyer is to hang in there. Pick your favorite neighborhoods and put a local real estate agent on speed dial.
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