Buyers Want To Know: Why Is the Single Family Home Supply Still So Low? - January 20, 2022
Ian Walterhouse
Thursday, January 20, 2022
Buyers Want To Know: Why Is the Single Family Home Supply Still So Low?
One key question that’s top of mind for homebuyers this year is: why is it so hard to find a house to buy? The truth is, we’re in the ultimate sellers’ market, so real estate is ultra-competitive for buyers right now. The number of buyers searching for a home greatly outweighs how many homes are available for sale.
While low inventory in the housing market isn’t new, it’s a challenge that continues to grow over time. Here’s a look at two reasons why today’s housing supply is low and what that means for you.
1. New Home Construction Fell Behind for Several Years
When there are a higher than average number of housing starts, it normally leads to a decline in prices because the demand for new houses is lower than the supply. And it follows that when there are a lower than average number of housing starts, it leads to increased demand and higher prices. The graph below shows new home construction for single-family homes over a nineteen year period in the GTA. Since 2016/2017 there has been a steady decline of single family home construction starts.
According to the Canada Mortgage and Housing Corporation, new home starts in Toronto in 2019 fell off a cliff. In ‘total’, they were down by a quarter, -25.8%. Multiple-unit starts were also lower by about a quarter, -24.2%, while foundation work for new single-family structures retreated by more than one-third, -34.4%. In the same year, Toronto’s population in the same time period rose significantly, by 125,000 individuals, and they all need somewhere to live. The result from that year after year decline means that there are fewer new homes available for purchase due to pandemic related delays in construction as well as higher than normal building material costs.
2. The Pandemic’s Impact on the Housing Market
When the pandemic hit, it fueled a renewed appreciation and focus on the meaning of home. Having a safe space to live, work, school, and exercise became even more important for Canadians throughout the country. So, as mortgage rates dropped to at or below 3%, buyers eagerly entered the market looking to capitalize on those low rates to secure a home that would fulfill their changing needs. At the same time, sellers hesitated to put their houses on the market as concerns about the pandemic mounted.
The result? The number of homes available for sale dropped even further.
What Does All of This Mean for You?
For a buyer, low inventory can be a challenge. You want to find the home of your dreams, and you don’t want to settle. But what if there just aren’t that many homes to choose from?
There is some good news. Experts are projecting more homes will soon become available thanks to sellers re-entering the market. A turnaround is likely to materialize even if that means that inventory could still be at roughly half of what we saw before the pandemic. The market will still be moving fast so if you see a home you like, you want to be ready to put in an offer right away.
You don’t have to put your plans on hold because you’re waiting for those additional houses to hit the market. Instead, stick with your search and persevere through today’s low inventory. You can find your next home if you’re patient and focused.
Remember your goals and why finding a home is so important. Those things should be the driving force behind your search. Share them with your agent and be clear about your priorities. Your trusted advisor is your greatest support as you navigate today’s low housing supply to find the home of your dreams.
Bottom Line
If you’re planning to buy this year, the key to success will be patience given today’s low inventory. Let’s connect to discuss what’s happening in our area, what homes are available, and why it’s still worthwhile to prioritize your home search today.
We would like to hear from you! If you have any questions, please do not hesitate to contact us. We are always looking forward to hearing from you! We will do our best to reply to you within 24 hours !