We’ve all felt the burden of rising prices over the past few years, but few industries have skyrocketed like the prices of homes and renting. While rising prices on homes sounds like a good thing for homeowners, it means those shopping for a home for the first time are being pushed out of entering the market. In fact, Nadia Evangelou of the National Association of Realtors estimates that 2.5 million first-time buyers will be out of luck in 2022.
Why has this happened? There are a myriad of factors that influence rent and housing prices. From low inventory to straight up corporate greed, having an affordable roof over your head is getting more and more difficult to achieve.
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Why Is the Housing Market so Tight?
There are many major (and fluctuating) issues causing this tight housing market. Some of the biggest factors include:
- Low inventory and high demand
- Building costs and limitations
- Interest rates
- Corporate buying
Supply & Demand
Right now, there are more families looking to purchase homes than there are homes on the market. According to the National Association of Realtors, active listings in February 2022 were down 21.9% from the previous year. In 44% of the metro areas they track, homes stayed on the market an average of only 15 days. With demand this high, the only way to compete is to offer well over asking price and have cash in hand—two things not feasible for the average first-time home buyer.
When there is high demand and inventory is low, it would make sense to ramp up production of new homes. But that’s easier said than done. In May 2021, lumber prices were 114% higher than the year previous, and iron and steel rose by 73%. At the same time, the average price of land (not including buildings sitting on it) has increased. And on top of that, decades-old zoning laws have slowly cut the available areas for any affordable housing.
When the average person buys a home, they get a loan to do it. The cheaper the interest on that loan, the more buyers are tempted to take advantage of and lock in that low rate. Interest rates were falling before the pandemic and during it, prompting a buying frenzy. Unfortunately, the past year has seen a steady rise from a low of 2.35% to a high of 5.64% for a 30-year fixed loan, but even those increasing rates aren’t slowing down the housing market much.
In 2018, Zillow (a popular site for finding homes and average values) started quietly buying up single family homes. The idea was to flip these houses in up-and-coming neighborhoods and sell them for a profit. And, they weren’t the only ones to take up this practice. According to Redfin, corporations and property investors made up 18.4% of US home sales in Q4 of 2021. With companies snatching up properties and holding them, they are further limiting the available market for buying, therefore driving up prices.
How to Navigate a Competitive Market
If you’re a renter and you want to turn into a homeowner, the first step is to not panic. Just because things are more difficult at the moment, doesn’t mean there is no chance of getting a home. It might just take some patience, ingenuity, and a really good real estate agent to stay on top of things and guide you through.
- Set Proper Expectations — You may not get everything on your list in this market; decide what are must-haves and what are just nice-to-haves.
- Get Preapproved — Preapproval shows sellers you’re serious and can back up your offer.
- The Listed Prices Don’t Matter — Think of the sticker price as a starting bid and expect to go up from there, sometimes significantly up.
- Use a Knowledgeable Agent — Make sure the real estate agent you choose is familiar with the area you’re looking in and has worked with first-time buyers before.
- US Department of Housing and Urban Development
- Consumer Financial Protection Bureau
- Investopedia – First-Time Home Buying
- Government Programs for Home Buying Assistance
- Find a Realtor
Why Is Rent so High?
If first-time home buyers are being pushed out of a hot housing market, then they have no choice but to rent. But rents, like home prices, have skyrocketed in recent years. Since 2010, rent prices have increased by 36%. (This is a huge problem when you consider that the average wage increase over the past decade was only 11%.)
Rents have grown to these extremes due to high demand from those being pushed out of home ownership. Apartments are being rented as quickly as houses are being sold. Not to mention that those already renting are forced to stay longer, leading to less availability. All of this means landlords can charge premium prices and renters are forced to deal with it or not have a place to live.
Still Renting? How to Get a Better Deal on Rent
Now that you know why houses and apartments are so expensive right now, find out how to get a better deal by relying on concessions, lease-ups, or simply enlisting the help of a free Apartment Locator. Our expert locators know all the buildings and their latest offers.
Plus, you can read all about our apartment locating service on our blog along with our moving tips & tricks for more information on how to score your next great apartment at a more reasonable price.
How AptAmigo Can Help Renters
If home ownership is out of your reach, or if you just prefer renting, AptAmigo is here to help make sure you find the perfect apartment at the perfect price. We’ve been around for seven years and have intimate knowledge of the industry and local markets.
All of our agents work in tandem with their fellow local agents, so you have an entire team of people behind the scenes, working to get you the right place to live. And our website is updated hourly with the latest listings, so you can be first in line to snag that dream space.
Need Help Renting Now? Reach Out to Us
It’s easy to feel overwhelmed when searching for an apartment in such a competitive market. Let AptAmigo ease the stress and simplify your move — work with our free apartment locating service today.
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Jeanette Smith is a writer, editor, and freelancer based in Dallas, Texas. Find out more at JeanettetheWriter.com.