If you have been following the housing market, you know that housing experts have been declaring a home sale inventory shortage since 2013. In National Association of Realtors’ (NAR) Nov. 27 Pending Home Sales Index release, chief economist Lawrence Yun partly blamed October’s 1.7% decline to “inadequate levels of inventory across the country.” He stated “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.”
However, if reporting holds true, the home sale shortage may be ending soon. The most recent housing permits report indicates that more new homes will be built, while media attention to a “silver tsunami” suggest additional existing homes will hit the market.
October’s increased housing permits suggest an increase in new homes to be built next year. According to a recent report, housing permits reached a post-recession high (Housing Permits Surge to Postrecession High; magazine.realtor; Nov. 20, 2019). Although permits are just an estimate for future construction, it is nonetheless relevant because, like pending home sales, it gives a hint of the potential for future home sales. Single family permits reached 1.46 million units during October, which is an increase of about 5%. October was the second-best month for housing starts this year.
Yun stated, “At 1.46 million units on an annualized basis, housing permits are nearly to the level needed for the country over the long haul. Since new-home construction kicks off the chain reaction of people trading up and trading down by buying new and selling their existing homes, more housing inventory will surely show up in the market next year.”
Robert Dietz, the National Association of Homebuilders chief economist, commented about demand for new homes, “The increase in buyer demand is also being driven by lower mortgage rates, which has been helping to lift the pace of single-family permits since April. Solid wage growth, healthy employment gains, and an increase in household formations are also contributing to the steady rise in home production.”
What about existing homes? According to Zillow Research, there will be about twenty million additional existing homes that will be for sale through the mid-2030’s (The Silver Tsunami: Which Areas will be Flooded with Homes once Boomers Start Leaving Them; Zillow.com; Nov. 22, 2019). These homeowners are 60 years-old or older, and will eventually sell their home because of health, retirement, relocation, and death. There will be regional differences depending on the number of senior homeowners. Zillow indicates that the Tampa and Tucson markets are likely to be affected most.
The “silver tsunami” is not a new concept. It was postulated in a 2012 NAR article The Boomer Effect. The article surmised that since Baby Boomers began turning 65 on January 1, 2011, there would be an increase in home sale inventory that would overwhelm the market. However, we are still waiting for the tsunami. As it turned out, the post-recession economy significantly changed, as did attitudes toward housing. Multi-generational households increased, and seniors are aging in place.
Will the anticipated increased number of new and existing homes to be sold provide the boost to home sales numbers? Maybe, if the added inventory is attractive to home buyers. It has been clear that home buyers will opt for value in a turn-key home. Home sellers need to keep in mind that home buyers are looking for affordable quality homes.
Dan Krell is a Realtor® with RE/MAX Platinum Realty in Bethesda, MD. You can access more information at www.DanKrell.com.