Greg Englesbe
Real Estate Investing

Supply-chain issues delay homebuilders on cusp of spring real estate market

U.S. home buyers who were hoping to see a friendlier market in 2022 have largely been told to curb their enthusiasm in advance of the busy spring real estate season.

Worsening delays in new home construction appear to be compounding the issue further.

“Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances,” said National Association of Home Builders chairman Jerry Konter told CNBC this week. “These delivery delays are raising construction costs and pricing prospective buyers out of the market.”

High construction costs not only end up getting passed on to buyers of new homes, but construction delays contribute to the wider inventory shortage that has made the residential real estate market so cutthroat over the last two years.

NAHB’s chief economist told CNBC that residential construction costs are up 21% over last year. Buyers also are facing higher interest rates this year, with the average 30-year fixed mortgage rate surpassing 4%. That’s up more than a full percentage point from last year.

The inventory problem continues to hang over housing market for buyers who find every step of the process more difficult and expensive. The country’s supply of existing homes and new construction seemed to show progress last fall, and there was some expectation that the lapse of forebearance protection programs would bring a significant supply of homes onto the market, but those forecasts did not play as envisioned.

In January, Zillow listed 923,000 U.S. homes for sale, down 40.5% from the pre-pandemic level in January 2020 and 19.5% from January 2021, according to Fortune.

In response to the pessimistic outlook on the supply front, Zillow revised its 2022 prediction of home value growth from an 11% increase up to an anticipated 16.4% increase — close to last year’s 16.9% annual increase over 2020.

A lot can happen over the course of a year, and sometimes there are unexpectedly positive developments that favor buyers, but 2022 is not looking great so far for those who have been patient during the pandemic or who don’t have the resources to make exceptionally competitive offers.

For sellers who may have waited out the worst of COVID-19, the decision could result in a substantial payoff.

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