I think we can all agree that 2020 was a disrupter of a year in many ways. Whether it shifted your outlook on healthcare, your plans to travel, or finally got you that “work from home” position you’d been wanting, it made quite the impact. In regard to home buying I saw many of my clients put the brakes on their plans as they waited to see how things shook out with the stock market, their jobs, and many other factors of the pandemic. This pause undoubtedly affected the 2021 housing market and what we’re seeing happen this spring but there’s more to it than just saying “oh, good ol’ 2020 messed everything up.”
While we have been seeing the competition for homes increase due to a shortage of options over the past few years 2021 has brought a new level of challenges to the table. It’s easy to blame everything on the pandemic but there is more than just the financial impact from 2020 affecting the housing shortage and people’s willingness to sell and move. I could talk about this for hours but I’ll give you the more concise version (at least my best attempt). There are several factors that are all coming to a head and combining to cause a trickle down effect in the shortage of first time homes available.
Home buying is really a large game of dominos. Once one person moves it enacts a chain reaction of openings so others can move behind them. So, starting at the top, who are the first people who need to be able to move? Baby Boomers! That’s right, your grandparents live in these beautiful homes that we refer to as “move up” homes. They are typically priced higher and are the houses people buy as their second or third home in their lifetime. The problem though is there is nowhere for this age group to go; not yet anyway. With people living longer and empty nesters becoming a larger population we have developed a need for smaller, more manageable housing for our older generation community. This means Baby Boomers are looking to either move to 55+ communities, which carry a stigma that people don’t like (think nursing homes) or they look to downsize to a non-community home, which puts them in the same house hunting pool as many first time buyers.
First, let’s talk about 55+ communities. The road blocks that 55+ communities face is that:
The second option for Baby Boomers is to enter the same buying pool as first time buyers. To their benefit, many of the Boomer buyers have cash on hand and the ability to outbid first time buyers on the purchase price. With their many years of knowledge and homeownership some Boomer buyers are also willing to be more flexible on contract terms like inspections or appraisals, which in a market with multiple offers is very appealing to sellers.
The last option is for Baby Boomers to simply stay put. Some feel that housing is too expensive right now for them to make a move to a 55+ community or get into a bidding war over a house they might only stay in for 7-10 years. Given the current competition I can’t say I blame them for wanting to stay put, but it causes an endless cycle of if no one moves, then no one has anywhere to move to and competition stays high for the houses that are available.
The long and the short of it is we are encountering a three-fold problem starting at the top of the chain.
All of these factors are contributing to a housing shortage far down the line where first time buyers are trying to purchase. With nowhere for those “move up” buyers to go, they are forced to stay in the houses first time buyers can afford and would like to get into. This shortage of options is why we are seeing such a competitive market and why it may be feeling impossible to buy a home right now. As I tell my buyers right now though, it’s not impossible, you just have to get creative.
Jessica Deleo is a licensed agent in Richmond, Virginia with One South Realty Group. All information provided is of my own opinion and intended for educational purposes only. Read full disclaimer.