Why Is There a Housing Shortage in 2023?
One of the largest concerns that I hear from both buyers and sellers alike is the lack of real estate inventory in the North Atlanta Market. The lack of available housing options has led to skyrocketing prices, bidding wars, and a sense of frustration among those seeking a place to call home. But why is the real estate market slowing down in 2023? And where have all the houses gone?
So, is the real estate market slowing down? Why is home inventory so low? The housing market slowing down is due to several key factors. The COVID-19 pandemic has triggered significant lifestyle changes, and we are now dealing with the aftermath of historically low interest rates which created, until recently, a frenzy among home buyers and sellers.
The low housing inventory in 2023 is the result of a few different factors including:
- Mortgage rates
- Lack of new home construction
- Remote work
Rising Interest Rates
Mortgage rates recently have experienced a substantial surge. For the seventh week in a row, mortgage rates continued to climb toward eight percent, resulting in the longest consecutive rise since the Spring of 2022. Rates have risen two full percentage points in 2023 alone and, as we head into Halloween, the impacts may scare potential homebuyers. According to Freddie Mac, current mortgage rates are hovering around 7.79%.
Homeowners are now believing that they are victims of "the golden handcuffs"; those who purchased or refinanced their homes at low interest rates are now hesitant to sell and buy another property that would entail a significantly higher mortgage interest rate. The substantial increase in interest rates has created a sense of reluctance among these homeowners, who prefer to hold onto their current homes rather than take on a new mortgage with much higher interest rates.
Lack of New Construction
Another factor impacting the 2023 housing shortage is new construction. New construction of homes dropped significantly with the 2008 housing bubble burst and again during the pandemic. Both times, the construction of new homes took some time to recover but was unable to keep pace with demand. Pandemic-related supply chain issues haven’t helped either as some construction projects become stalled waiting for supplies.
The COVID-19 Pandemic
The pandemic may have had another secondary effect on the low housing supply. With remote work becoming more of a norm, people were able to find housing in cheaper locations farther away from their offices. Many people also no longer need to relocate and move for a new job. Instead, they can continue to stay put where they are.
How the Housing Shortage Affects Buyers
With limited inventory and rising mortgage rates, Buyer may feel that they are in a bit of a pickle, and finding their "dream home" might be more difficult than it anticipated. Though the Atlanta Real Estate market has slowed down a bit, and houses are sitting for longer, in most cases, Sellers are still in the power seat.
What Buyers Should Do in A Housing Shortage
- Act fast - If you really love a home or want to get a tour, you may need to act quickly. If you wait too long, you might miss your opportunity.
- Compromise - With home prices high, mortgage rates high, and a limited number of homes available, you may need to make some concessions on location, size, or other features to find and secure a home in your price range.
- Be Prepared - Especially if you are less inclined to compromise, it may take longer to find your dream home. Be prepared to search for a longer time and potentially have rejected offers.
How the Housing Shortage Affects Sellers
Though the limited housing inventory can in many instances lead to multiple offers, higher sales prices, and fast transactions, Sellers still have to deal with their own set of challenges.
The high amount of inventory and low-interest rates of the recent past, paired with HGTV rage, has skewed buyers' expectations; they are not willing to spend their life's savings and overpay for a home that is not "perfect" or move-in ready. In addition, with higher interest rates, most buyers will not have the slush funds needed to do repairs and renovations.
What Sellers Should Do in A Housing Shortage
- Fix Up Your Home - It could be as simple as a new carpet and a fresh coat of paint but try not to list your home before it is truly "market ready." A pre-listing inspection and minor repairs can go a long way to ensure your home sells quickly at the highest price possible.
- Consider Home Staging - It is amazing the difference that home staging can make! On average, professionally staged homes sell three times faster and for 10% more than homes without staging. Buyers will not only feel "at home," but they will also be able to envision each space for its truest potential. Any minor flaws of a property can easily be overlooked when a home's best attributes are highlighted.
- Price Accurately and Manage Expectations - The last thing you want is to keep having to drop the price. Although there is a housing shortage, you may still need to make concessions on the sale, and your house may still be on the market for longer.
Is This a Bad Time to Buy or Sell?
No! While the low housing inventory in 2023 has added some challenges to the current real estate market, it doesn’t mean you can’t find success.
According to housing market experts, housing inventory challenges take about four to six months to recover. Many Buyers and Sellers have put moving plans on hold for the last 9 months, and 2024 could see great opportunities in the Atlanta Real Estate market. The expectations of Buyers and Sellers alike are starting to be tempered, and there will always be people who need to move for various circumstances. Though the housing shortage may not resolve itself immediately, there are still opportunities to be found, and real estate is still a phenomenal investment.
At McMillan Luxury Group, we can help guide you through the complexities of Selling your home or finding your dream home. Give us a call today at (404) 759-4238
