- Low mortgage rates and the remote-work boom have fueled home-buying during the pandemic.
- The frenzy has depleted inventory, sent home prices soaring, and anointed new hot places to live.
- This guide lays out the facts to know to help decide if you’re ready for homeownership.
- See more stories on Insider’s business page.
The hottest pandemic purchase is a house.
Over the past year, 11% of Americans have moved. Unmoored by remote work and driven by the desire to be near family or enjoy a lower cost of living, buyers have been snapping up primary residences and second homes, fleeing the coastal cities and flooding states such as Texas and Florida, as well as smaller cities, spacious suburbs, and vacation-home spots.
The mass relocations and purchases — coupled with the reluctance of existing homeowners to find a new place to live during a pandemic — have driven the number of homes for sale down to record lows, which in turn has propelled home prices to their highest rates in 15 years.
Intense bidding wars are commonplace. Take one California home that got 122 offers in two days. A Redfin report found that half the homes for sale in the US are selling within a week.
Add that up and it’s harder than ever to break into the real-estate market.
Here are five things to understand in order to decide whether you’re ready to take the plunge into homeownership.
1. There’s a striking imbalance of supply and demand
Competition to buy a home is fierce.
There are more people who want to purchase properties than there are homes on the market. (There are even more real-estate agents in the US than there are homes for sale.)
Dwindling housing supply has fostered intense competition marked by bidding wars and all-cash offers.
The tightening housing market is goading prospective buyers into expensive homes that don’t ultimately fit their wants or needs. But for those with cash to spare who are prepared to compromise, now could be a decent time to scoop up a property.
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2. Buying a house is expensive even though mortgage rates are still low
Low mortgage rates and the desire for comfortable work-from-home digs have fueled a home-buying frenzy.
The spike in real-estate activity has absolutely depleted housing inventory and ratcheted up housing prices, meaning you could ultimately be overpaying for a property you’d be settling for anyway.
Mortgage rates are still at historic lows, but the high home prices can cancel out the opportunity to get more house for your money and keep monthly payments affordable.
And don’t forget to budget for closing costs and insurance.
The average homebuyer now needs to offer above asking price
A $400,000 house got 122 offers in 2 days, highlighting the desperate frenzy buyers are facing amid skyrocketing real-estate prices and a dearth of homes for sale
US home prices are soaring upward at the fastest rate since 2006
The typical American house price keeps hitting record highs. Redfin says the rise is ‘concerning.’
3. Building a new home may not be much of an alternative
While existing listings dwindle — in part because homeowners are reluctant to resell their homes out of fear that they may not be able to afford their next one — a possible solution is to buy land and build a new house.
But the raw materials necessary to construct a new property have gotten exorbitantly expensive amid the pandemic. Logistics and shipping issues have resulted in long waits for certain supplies.
There’s also a finite number of contractors and workers to erect such homes. Those workers are in demand, meaning labor costs are also high. Builders nationwide are facing severe delays to complete new builds or even finish renovation projects on fixer-uppers.
The added costs and delays slow down builders, lead to even more expensive home prices, and act as a deterrent to hopeful buyers.
Inside the business of a general contractor in Atlanta, where home renovation prices are in ‘bizarro world’ and backlogs are stretched to 12 weeks
Surging lumber costs have increased the average cost of a new house by $24,000
Lumber prices are so high that many builders are holding back on construction
The cost to build a house depends on the size of your home, but it’s generally more expensive than buying a home
4. Many popular places to live have become even more unaffordable
The pandemic emboldened many Americans — particularly employees who could work remotely — to ditch their big-city apartments and try out the suburbs, rural areas, or different states.
It led to booms in states such as Texas, Florida, Colorado, and North Carolina.
Buying a home in these newly popular areas may result in even more competition. Think higher prices and fewer houses to choose from.
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Elon Musk decries Austin’s housing shortage and sky-high home prices. Peek inside the bonkers real-estate scene in the city Musk predicts will be the country’s ‘biggest boomtown.’
The 10 states where residents pay the least in property taxes — and how much typical homeowners can expect to pay
5. Do thorough research before making any offers
Over the past year, some have snatched up houses only to be met with buyer’s remorse, while others have happily profited from their real-estate investments.
House-hunting hopefuls can prepare to buy by establishing an emergency fund, determining how much to budget, and getting preapproved for a mortgage.
Why finding a home shouldn’t be your first step in buying a house
A hopeful millennial bought a house during the pandemic and regrets everything. Here’s what she learned so you can avoid her mistakes.
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How to invest in real estate right now, according to an economist and a multimillionaire developer