The Marketing is Changing, and Now is the Time to Buy
If you’ve been on the fence about buying a home, or if you’d like to, but think it’s best to wait until the market “settles down,” we wanted to share some information to help you understand what’s happening in housing today and why now is still an incredible time to buy a home (if you can find one). It comes down to the basic economics principle of supply and demand. Currently, demand is far outpacing supply when it comes to housing. That means decreasing inventory, rising prices, and a small window of opportunity for you to take advantage of the market during this shift.
Housing Costs are Rising
The reason is two-fold. Since March 2020, there’s been an unprecedented demand for housing – both resale and new. This has been caused by a new remote workforce not being tethered to any particular geographic area, and the desire for more outdoor space and open-concept design. People are buying houses in droves, causing bidding wars, price increases, and a diminishing supply. According to Realtor.com, the median list price has increased by 15.6% over last year.
The second reason for the cost increase is that building materials have become scarce and, therefore, more expensive. Lumber has made the news repeatedly, and is a big concern for home builders. In the last year, lumber mills in both the U.S. and Canada (where we get most of our softwood lumber from), shut down due to pandemic-related health concerns. At the same time that production slowed, demand surged due to the number of new homes that were being built and the rise in existing home renovations. The price of lumber has increased 193% since last year. More expensive lumber means more expensive homes.
Lumber is just one example. Nearly every line item on a home’s product list is facing the same challenges. Resin for paints and sealers, appliances, electric components, and more are scarce, so builders are willing to pay more for them just to complete a house.
The rising cost is something to be concerned about if you are buying a home in the future. However, if you are considering a new construction home now, pricing should reflect what the builder paid for the materials at the time of construction. That is, if you can still find a new home for sale, which brings us to the next point.
Inventory is Shrinking
The longer you wait to search for a home, the fewer options you’ll have. Existing home sales are up 9.1% higher than last year (NAR), and new home sales have increased by as much as 22% year-over-year (NAHB). With the home construction industry facing such severe materials shortages, new homes aren’t being built at a rate to keep up with demand, so buyers are snatching up resales in desirable areas. If you are considering a particular home now, there’s a good chance it won’t be on the market for long. Realtor.com reports that homes in Atlanta today are on the market 18 days less than they were last year.
Interest Rates are Still Low, But Rising
Another factor fueling home sales in the last year has been record-low interest rates for mortgages. A low interest rate means that it costs less to borrow the money needed to buy a home. Home buyers who may have been concerned about monthly payments are enjoying lower rates, and families can afford to buy larger homes. Interest rates change daily, and have risen as the economy stabilizes, but they are still near historic lows and are an incentive for home shoppers to buy now before they rise even more. (If you’d like to learn more about interest rates and how much home you can afford, we encourage you to contact our preferred lender.)
Real Estate Can Be a Smart Investment
With home prices rising across the country, and more specifically in Atlanta by almost 20% year-over-year, now is an ideal time to buy and take advantage of that upward trajectory. Equity in your home means having a nestegg that you can access later in life if necessary, and it means your home will sell for more than you paid for it, which means cash in the bank. At some point, growth will level out, so the opportunity to build equity so quickly won’t last long.
Rental Rates are Increasing, Too
High demand and low supply of housing is impacting the rental market, too. Because it’s harder for renters to find a home to buy, the demand for rentals has increased, driving prices up in this sector, too. Rents in Atlanta have increased by about 4% since last year.
Owning is Better Than Renting
If you can afford the down payment, and if you qualify for a loan, the math is simple. Lock in a low interest rate today and your payments won’t change. Start building equity now, while home values continue to rise, and invest in your future. Continue renting, on the other hand, and be subjected to rate increases that are beyond your control.
The decision to buy a home is, for many, the largest purchase decision of their lives. It can be intimidating to be a homeowner, but it’s also incredibly liberating and rewarding to have total control over where and how you live.
If you’ve been considering buying a new townhome at Mason Flats, now is the time to do it. Our limited inventory of set-price, 2 bedroom, 2.5 bath homes in southeast Atlanta won’t last. Call (404) 594-4009 or schedule a tour today – we’d love to show you around!