Investing in Real Estate: Should You Wait to Buy a Rental Property Until Inventory Recovers?
There has been an increase in school-at-home and work-at-home situations that have made our houses even more negligible or somehow less functional. However, homeowners looking to augment their learning and working spaces have limited choices because there just aren’t many houses on the market.
According to Black Knight, this year’s housing inventory is staggeringly low as of April, with 53% fewer homes on the market and a deficit of nearly 750,000 available-for-sale homes compared to a similar time frame in 2020.
So, What Does This Mean to Today’s Buyers?
Limited housing inventory has several implications. First, it’s progressively increasing home prices. When a particular commodity tends to be short in supply, its demand rises, increasing its price tag. That’s also the case for today’s homes. In February, the average sales price for a single-family home rose by approximately 16% from the previous year, and while mortgage rates are modest, they’re still not low enough to help offset high prices of homes.
Limited housing inventory also means that buyers may have to accept properties that are not in line with their desires. That could mean compromising on layout, proximity to amenities, outdoor space, or square footage.
All of this boils down to the question, is buying a home today worth it? Or should you sit tight until inventory recovers?
Buy Now or Wait Until Inventory Opens Up?
One of the major causes of low housing inventory is that sellers have been hesitant to list their property during the ongoing pandemic. While most of that cuts to health-related consequences of inviting strangers indoors for showings and open houses, it’s also a result of avoiding any significant moves during a period of extreme recession.
But as vaccines are given out on a widespread level, we should see housing inventory opening up sometimes later. More people may decide to list their homes once the economy starts to recover and the pandemic begins to improve, hence more inventory to choose from and at a lower price. There’s also a good chance mortgage rates will most likely remain stable throughout the year. As such, it could pay for buyers to hold on till housing inventory opens up in the subsequent months.
Another thing buyers should keep in mind is that, generally, more homes are listed during the spring and summer than during the winter months. That means inventory may pick up this month as it naturally does, then, as from July, prices may start to drop as the market opens up.
However, buyers who find homes of their choice and can afford them don’t have to wait to make an offer, especially while mortgage rates are still attractive. But for anyone who’s struggled in the past months may want to back down from their home search and wait things out.
On that note
Purchasing a home where housing inventory is extremely low is such a hectic and stressful process, especially with all the uncertainty caused by the pandemic. As such, choosing whether or not to invest in rental property is a difficult choice.
To make your work easier, contact Michael Leafer to find your first rental property or receive short-term lending/funding to rehab your rental property. Great deals are always available on Michael.