Are you a frustrated home buyer? There are a lot of you out there right now due to a historically low housing supply which is fueling housing inflation and restrictions like we have never recorded before. And this is not only a Wisconsin problem; it is a national epidemic. According to Business Insider, “The hottest pandemic purchase is a house, as more and more Americans take advantage of low mortgage rates to attain spacious backyards and more comfortable work-from-home locales.”
So why is this happening now in a pandemic?
Interest rates as low as 2.1%. You can borrow money cheaper than ever before. Monthly mortgages are often much cheaper than rent, which has skyrocketed due to building and supply costs.
The “Work from Home” movement. Looks like this might be here to stay as more people work from home and companies find this movement cuts overhead on office supplies, rent, and business travel. Homeowners have a real need now to find a better work from home experience which is pushing people to buy larger homes.
Social distancing. People do not want to live in apartments more than ever since the pandemic began. The suburbs are once again popular, which explains Mequon’s jump of 216% in closed-sold business November 2020 over November 2019.
Building costs have skyrocketed. You can plan on paying approximately $300 a square foot or more to build a home. Existing housing here in the North Shore is running from about $200 to $250 a square foot depending on the community and location. This makes it cheaper to buy than to build or even rent.
Move-in ready moves fast. Expect multiple offers on homes with new kitchens and baths. It is so much cheaper to buy it done. Remodeling, like building, has skyrocketed with the cost of building materials going up and up. No one wants contractors in their home with COVID, and there are delays in remodeling like never before.
The home building and remodeling supply chain still has real issues. Lumber is expensive and hard to get. Our buyers and sellers who want to remain in the Milwaukee area and purchase a larger home have limited choices at all price points. If you are a Seller and have a home to move to, you’re in a great situation. If you are a Seller who is looking for a home outside of Wisconsin, you will have challenges ahead as this is a nationwide problem. We have sellers wanting to sell but no available housing for them to buy once we sell their home, which is creating a bottleneck in the industry as a whole.
As of this writing (January 20, 2021), this week alone we wrote an offer which was accepted on a “Coming Soon” home sight unseen for cash with no contingencies. Although the Buyer purchased the home, they have not stepped one foot inside of it yet. This is the third time this year I have wrote an offer like this. The first time the Buyer will get to see their new home is more than a week later on January 28, and they do not have an out on their offer.
This process is getting more commonplace. Our experience last night was even more interesting. We had a Buyer write a cash offer of $25,000 over the asking price with a two-hour turnaround time, and the Seller countered with multiple counteroffers because there were five other offers just as compelling. Virtual buying (viewing the home online or via video call with an agent without physically being inside the home before making an offer) is becoming more commonplace. We are video calling buyers more often and drafting offers based on virtual showings.
This is where there is no substitute for experience, Buyers working with unexperienced agents without good training, broker access, local networks, and street experience most likely will not be able to win. We are writing the most creative offers of my career, and this is a new experience even for this 20-year veteran. We have never had inventory this low. There is a real risk of running out of houses with only 2.5 months of inventory in the marketplace. My advice to Sellers is to sell if you have a place to go, and to Buyers, it’s be patient and work with a highly experience agent to find the home of your dreams.
