Housing Supply

January 28, 2021

According to Zero Hedge, “For 2020, New Home Sales climbed to 811,000, the best level in more than a decade, and Housing Supply was down.

Housing Supply

As mortgage rates sank in March, the low rate environment gave the slow housing market a second wind. Thousands of buyers priced out by sky-high prices (record median home prices rose 8.0% YoY to $355,900) found a way to enter the market by leaning on financing, and those on the edge of qualifying were suddenly and automatically back in.

The market is still years away from reaching an adequate supply of homes to meet today’s demand from buyers. Despite improvements to new construction and short waves of sellers, next year will fail to bring a solution to the inventory shortage. In 2020, the expected inventory shortage will struggle to grow and could instead reach a historically low level. The yearly declines are likely to be moderate and range between 1-to-5 percent for most of the year. A steady flow of demand, and robust-yet-declining seller sentiment will combine to ensure there is no surplus adequately-priced inventory.

Speaking with Realtors

If you speak with most realtors, you will hear stories of low inventory, rising prices, and multiple bids on houses for sale, most over the asking prices.

Realtor.Com tells us that, “Overall buyer demand will remain very robust, particularly at the entry level. The country’s largest population group (those born in 1990) will turn 30 in 2020, accounting for 4.8 million millennials hitting peak home-buying age. As a group, Millennials (those born 1981-1997) will take more than half of all mortgages next year. For the first time, Millennials’ share of mortgage originations will surpass 50 percent in the spring, outnumbering Gen X and Baby Boomers combined. The last generation to take more than half of all purchase originations was Gen X in 2013, just six years ago.

The Biden Fix

Now our new President Biden has a fix. He has a proposal before Congress of a $15,000 first-time homebuyer tax credit. If passed, the funds could be accessed immediately by the buyer at the closing table. Biden’s tax credit is more of a possibility now that both Senate races in Georgia went to Democrats.

The challenge with the tax credit right now is that demand is already robust with mortgage rates so low, and most evidence is showing that high earners have increased savings during the pandemic.”

I would prefer to see a tax credit go to home builders to increase affordable housing inventory to satisfy the demand, rather than increase demand for existing housing stock.

If you are a renter looking forward to owning a house someday, it may get more challenging for you. More demand means less inventory and higher prices.

Jane Perillo


2700 Kirkwood Highway

Newark, DE 19711

(302) 995-2535

(302) 995-2550 fax

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