There’s a reason the past couple of years have been tough ones for prospective home buyers. Not only have mortgages been expensive to sign due to elevated borrowing rates, but there’s been a massive shortage of homes on the national market.
If you’re a buyer who struggled with limited housing inventory in 2023, you may be hoping for better news in 2024. Unfortunately, inventory might remain stagnant for a while since we’re starting off the year with expensive mortgage rates. Those are likely to keep existing homeowners where they are, since many current homeowners have much lower rates in place than the rates that are available today.
Of course, existing homes aren’t the only option for would-be buyers. As new construction hits the market, buyers could have added opportunities to make offers.
The problem, though, is that new construction slowed down substantially at the end of 2023. And if things don’t pick up, buyers could be in for a very frustrating 2024.
Housing starts fell in December
Housing starts, a measure of new construction activity, fell by 4.3% in December compared to November, according to the Census Bureau. That means new construction slowed down at the end of 2023, which doesn’t bode all that well for 2024.
Now, the good news is that permits ticked upward in December, rising 1.9% from November. But housing starts are a measure of active construction, whereas permits are more of an indication that there’s construction being planned. So all told, this isn’t the best of news for people who are looking for a near-term increase in real estate inventory.
How to buy a home when there’s limited inventory
Buying a home in a low-inventory market can be a huge challenge. But it’s one you may be able to overcome.
First, consider being open to different neighborhoods if you’re not seeing homes come up in your most desired ZIP code. Being a bit flexible with where you live could open the door to more opportunities.
Also, consider a home that needs work if the issues in question are ones that are fixable over time. In other words, if you want a home with a large backyard and the only available property in your preferred neighborhood and price range has a yard the size of a postage stamp, don’t make an offer. You can’t magically turn a tiny yard into a large one.
But let’s say your dream home has a finished basement, and you’re only seeing homes in your area with basements that are unfinished. That’s a solvable problem. It may take time — and savings — to address it, but it’s an issue that’s fixable. So don’t write off a house with some flaws if they’re things you can work on over time.
It’s not an easy thing to be a home buyer at a time when housing inventory is limited. But that doesn’t mean you’re doomed. Be open to different neighborhoods and properties.
Also, think about it this way: The longer it takes you to find a home, the more opportunity you have to pad your down payment. That could lead to more affordable housing costs once you’re able to buy.
Remember, that in time, mortgage rates are apt to come down, which could lead to an uptick in inventory. And those construction permits we talked about earlier? They’re apt to eventually lead to more homes on the market once that work gets off the ground. So for now, your best bet may be to exercise patience if you really can’t find a suitable home to make an offer on.
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