I’m sure you remember the housing market from a year ago. What was absolute insanity has made a turn for something even worse. Now, homebuilders are struggling so much that they’ve decided to turn to investors by offering several homes at bulk discounts.
A fifteen-year high, mortgage rates have jumped from 3.01% a year ago to 6.7%, offering two harsh consequences. Demand for mortgages dropped by 29% in September. Builders are also now increasingly skeptical that residential buyers will be approved for financing, leading them to seek out other potential options. One of those options is selling to investors, who buy homes in bulk at a discounted price. Due to the lack of demand, some are offering up to 20% for investors to take inventory from them.
There are two trends that paint a scary picture going forward. Homes under construction were up 14% in August, which means that supply is going up while demand is going down. That’s a huge negative for builders. Investor purchases are also down, and staggering rates make financing these houses even more costly.
Most importantly, this current state could have a harmful impact on first-time buyers. If investor purchases increase, it will reduce inventory and keep prices high, making a stressful housing market even harder to get into.
Now, not only are homebuilders panicking but potential homeowners are being put in a bad place right now too. Many homebuilders are recommending people tp hold onto their cash and brace for the bumpy ride ahead in the market. As buyers cancel orders, builders are slashing prices, causing stress for pretty much everyone.
Costs not only for lumber, but other materials have skyrocketed, also adding to the issue. Because of this, some builders are unable to purchase quality materials that they once were able to, creating the question of if new builds are even worth buying right now. Cancelation rates have jumped up to 14% nationally, largely due to inflation and the recession we’re in the midst of.
Such scary times.
Macie LaCau is a passionate writer, herbal educator, and dog enthusiast. She spends most of her time overthinking and watering her tiny tomatoes.
