If you are in the market to buy or sell a house, you have probably heard about the housing inventory shortage that is happening across the country. As a home inspector in the central Maryland and South-Central Pennsylvania regions, I literally see hundreds of homes and it allows me to see the trends in the Real Estate markets here. Many of my recent clients have described extreme experiences with the purchase of their new homes, with quite a few Buyers and their Agents having to have gone to literally dozens and dozens of showings and submitting multiple offers before getting “lucky enough” to have their offer accepted. With fewer houses available, properties are certainly selling more quickly, but what exactly does that mean for buyers and sellers?
Skipping the Home Inspection???
There are a lot of scenarios that are emerging from this inventory shortage. One of them is that home flaws that might emerge during a home inspection — which in the past might have been a big red flag to buyers — are now, in some cases, being accepted in as-is condition. Buyers seem to be willing to pay more for less, in other words. Although you might think that foregoing a home inspection is a clever idea to help you have a more enticing offer in this hyper-competitive home market, it is creating a very risky situation for Buyers and even for their Agents. Home purchases are, for most people, the biggest investment they will make over their lifetime; foregoing a home inspection may be the biggest mistake you can make by not educating yourself about the condition of the property before making that huge investment. Home Inspections will often reveal information about the defects and deficiencies within the property across many disciplines including structural, mechanical, electrical, plumbing, and more. By foregoing a home inspection, Buyers may be exposing themselves to unnecessary risk by walking into an initial investment that might turn into an even larger investment to repair or replace things that could have been brought to light prior to the home purchase. Agents must be careful when advising their clients to forego a home inspection as this may also come back against them later in possible legal issues and/or proceedings.
The best thing to do is obviously to get a full home inspection performed against a State Standards of Practice with a written report. However, instead of foregoing the home inspection altogether, you may have another option. Some Home Inspection companies may also offer a “walk through” or “consultation” service as an option to getting a full home inspection. These are sometimes done for frequent customers such as a Investors who are already familiar with homes and the various systems in them but who also want peace of mind by having a Home Inspector’s knowledge and hands and eyes on the property. Often, the “walk through” or “consultation” service will involve having the Home Inspector walk through the property with you and point out his/her observations to you as you go. This type of service usually does not have any written report delivered to you at all, so you will want to be prepared to take notes during the consultation. Since the consultation service is not a full home inspection, it will likely be slightly more affordable, too. In any case, you should try to have some sort of Home Inspection service performed for you to help mitigate your risks.
What else should buyers and sellers be aware of when it comes to the housing inventory shortage? Agent insights from the experts at HomeLight reveal some data that can help you stay informed as you navigate this unusual market.
Sellers are putting on the breaks
Agents are talking about a scenario that might make your head spin: would-be sellers do not want to sell because not enough people are selling. If this is confusing, you are not alone. In the survey, 69 percent of agents said this is happening in their markets, in part because with fewer options, people are having a hard time envisioning how they are going to make their next home a reality. This situation applies mostly to homeowners who are navigating buying and selling at the same time. The reality is that people who don’t need to move, probably will wait it out for the time being. Those who do move now may have advantages as sellers, getting higher prices for their homes. Although you as a Seller might make a windfall on a deal to sell your property, if you stay in the same local market, you most likely will face the flip side of that coin when trying to purchase another property as a Buyer – it is all relative.
A pandemic made low inventory even lower
Experts have noted that the low inventory shortage actually began in the aftermath of The Great Recession in 2008. Agents across the board agree that the current inventory shortage is more severe and is in fact lower than they might have expected, with an overwhelming 94 percent of agents saying the shortage is getting worse in their markets. An inventory shortage means that buyers and sellers might take a wait and see approach, put more time into researching their next home (such as getting information about a realtor’s commission, or necessary inspections), and think about what they want their dream home to look like.
There is no doubt that COVID-19, as it has with just about every other industry, has negatively impacted the Real Estate and Home Inspection markets. In the first half of 2020, COVID-19 definitely slowed the market down, and in some markets such as Pennsylvania, even completely halted them. Health concerns obviously drove a cautious and slow approach to rekindling the market and getting it started to head back on track. Many people stopped plans to buy or sell properties altogether during the early stages of the pandemic and/or decided to wait. Low interest rates and preventive health measures gradually helped to get some sellers and buyers back into the market, but nowhere near back to “normal”. Inventory continued and continues to remain low, creating the imbalance between having more Buyers than Sellers. Hopefully, as time progresses, as more people are vaccinated and more people build immunities to COVID-19 via natural antibodies, we will see an increase in comfort levels in consumers in the housing market.
New construction is at a halt
One way to combat the inventory shortage as we have seen in past would be to bring new homes on the market, but as the pandemic shut down necessary sources of building supplies — like lumber mills for instance — the cost for these supplies rose rapidly, thereby making homes more expensive to build. New construction has been delayed for many builders as a result. Building materials, particularly lumber, continue to rise in price as the supply continues to be unable to keep up with demand, much of which was pent up demand during the more cautious, early periods of the pandemic when mills and factories were shut down or reduced significantly in capacity. With the recent changes in Government administration and policies, the Nation is now experiencing some rapid inflation and continues to be plagued by high unemployment, which may also negatively impact new construction and inventory levels in the housing market.
Inventory changes won’t happen overnight
Like the gradual shifts that are happening across the country as a vaccine rolls out, inventory changes will be a slow process. In the survey of real estate agents, a little more than 20 percent of them said that adjusting tax or regulatory guidelines to spur homeowners to sell would help free up some inventory, but this is not a quick fix. Economics are seldom simple, and changes in markets usually happen gradually as many factors contribute to them such as supply/demand, government administrative, tax, and fiscal policies, local and national employment levels, and as we have seen recently, globally impacting unplanned obstacles such as a pandemic.
Your best strategy is to stay aware of the trends in your market and stay in touch with an experienced Agent who can help you make an informed decision about your next move.
When preparing to enter the Real Estate market, whether you are considering listing your home and/or shopping for a new home, take some time beforehand to consider some of the various factors we have presented here in this article. The present market is unique and it is hyper-competitive and even stressful; but with lots of research, a good Agent, and a good Home Inspector, you can still make good real estate decisions and transactions.
At Absolute Assurance Home Inspection Services, LLC, we want to ensure that your home purchase and/or sale goes smoothly in any market and that you are educated about your financial investment prior to finalizing transactions so that you are protected. Home selling and buying is stressful enough; why forego a home inspection and put yourself and your investment at risk unnecessarily? Would you purchase a luxury vehicle or boat sight unseen or not have a mechanic look over a used vehicle before purchasing it? Even if you are in a competitive situation that might dictate that you will need to purchase a home in as-is condition, get a home inspection so that you know exactly what you are buying. If nothing else, the home inspection can become your “honey do” list of repairs that you can work on over the coming seasons; but in worst-case scenarios, it might enlighten you to a situation you do not want to proceed into, even if it means losing a downpayment.
For a quote in Maryland or Pennsylvania, contact us today at 443-939-HOME (4663) for all of your Home Inspection needs including mold inspection and testing, radon testing, and water testing! We can provide these services as well as full and partial home inspections for buyers/sellers/investors, rental inspections, annual home inspections, and more!
Portions of this article are not the author’s original work and were sourced under copyright permission courtesy of Mackenzie Kirk at HomeLight.