Will Supply-Chain Problems Affect Housing Affordability?

 

Although the hot market and buyer demand have pushed up home prices, the market still shows steady housing affordability. Even though home prices have risen, they are offset by the record low mortgage rates. According to reports, the housing market is not all smooth sailing. The ongoing supply-chain problems around the world have disrupted new construction and renovations.

The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) reported that 56.6% of both new and existing homes that were sold between July 2021 and September 2021 were affordable for U.S. families earning a median income of $79,900. This is the lowest affordability level since the first quarter of 2012!

The HOI also revealed that the U.S. national median home price rose to a record $355,000 in the third quarter. This is a rise of $5,000 from the second quarter of 2021 and a $35,000 increase from the first quarter of 2021. Buyers did not feel the rise because the average mortgage rates dropped by 14 basis points to 2.95% at the same time.

This is good news but there are some setbacks to the market. It has been hard to get materials and product is increasing in price at a fast pace.

“Persistent building material supply chain bottlenecks and tariffs on Canadian lumber and Chinese steel and aluminum continue to place upward pressure on construction costs and home prices,” said NAHB Chairman Chuck Fowke. “Policymakers must fix supply chain vulnerabilities that are disrupting and delaying construction projects and hurting housing affordability.”

“Interest rates are anticipated to gradually rise in the coming months as the Fed begins to taper its monthly bond and mortgage-backed securities purchases,” said NAHB Chief Economist Robert Dietz. “To keep affordability problems from worsening in the future, policymakers need to tackle supply-chain challenges that are hindering new home production. Helping builders boost output will also slow the rapid rise in home prices that has occurred over the past year.”

The five most affordable housing markets around the country currently are Lansing-East Lansing, MI, Pittsburgh, PA, Indianapolis-Carmel-Anderson, IN, Scranton-Wilkers-Barre-Hazleton, PA and Harrisburg-Carlisle, PA. The five least affordable major housing markets are Los Angeles-Long Beach-Glendale, CA, Anaheim-Santa Ana-Irvine, CA/San Francisco-Redwood City-South San Francisco, CA tied for second, San Diego-Carlsbad, CA and Oxnard-Thousand Oaks-Ventura, CA.

For the small housing markets, the five most affordable are Davenport-Moline-Rock Island, IA-ILL, Monroe, MI, Sierra Vista-Douglas, AZ, Fairbanks, AL and Wheeling, WV-OH. The least affordable small housing are Corvallis, OR, Salinas, CA, Napa, CA, Santa-Cruz-Watsonville, CA and San Luis Obispo-Paso Robles-Arroyo Grande, CA.

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Perks in the Housing Market For Present-Day Buyers and Sellers

The current housing market offers perfect opportunities for both buying and selling a home. In today's

market, there are a couple of perks for both home buyers and sellers that are hardly ever available.

This is a perfect time to purchase a home because of the historic low mortgage rates. The average mortgage interest rate has hit an all-time low. In fact, it is the lowest in the history of the Freddie Mac survey which dates back to 1971. Today's buyers can actually obtain a mortgage rate lower than the past two generations of homebuyers.

“Purchasing power rose 10% year-over-year…With interest rates hitting record lows, buyers were able to afford $32,000 “more house” as of July 23 than they could the year before with the same monthly payment,” according to the National Mortgage News.

Buyers will not only save money on a home, but they will have the opportunity to get more home for the money. This is especially appealing with today's pandemic pushing work from home. Homeowners are re-evaluating the amount of space they need in a home.

As for current sellers in the market, the low inventory has definitely been an advantage. According to the National Association of Realtors (NAR) the inventory of homes coming into the market continues to decline.  Even before the pandemic hit, the inventory was low. In today's market, houses are selling faster than they are being listed.

Bidding wars are the norm now. The fuel of low mortgage rates and low inventory is pushing buyers into bidding wars.

“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply,” says Lawrence Yun, Chief Economist for NAR.

If you are in the market for a home or want to sell your current home, now is the time. Contact a Realtor in your area who can help you through the process.

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