In this current mad dash to find housing, the first 48 hours are proving to be crucial to either make or break a deal, especially for prospective middle-class homebuyers.
Just ask Jonathan Sigrist and Krystal Dickison of Charlotte, North Carolina. Within a 24-hour span, the couple saw a home they really liked, went on a tour the next day and put in an offer that evening.
Their real estate agent had advised them the seller already had multiple offers. They better act quickly if they wanted it, she said, and even should consider making "certain contingencies." The couple agreed to some, including taking the home in its current state and offering $13,000 over the asking price.
It worked. The couple will close on the home later this month in one of the toughest housing markets in the country.
"It's happening. It was amazingly stressful. We're first-time homebuyers and we really had no idea what was going on," Sigrist said. "We both had mixed emotions, excited about the possibility of getting it, but also sad that we might lose it, all in a matter of hours."
Affordable homes in short supply
The scramble for housing for the middle class has been a struggle for decades, housing experts say. According to a 2021 study, “Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing,” commissioned by the National Association of Realtors, “underbuilding (has) placed a significant strain” on the for-sale housing market. The inventory of available homes available to buy has steadily declined even before the COVID-19 pandemic, which only exacerbated the problem.
Now, first-time homebuyers seeking to take advantage of still-low mortgage rates also must contend with a lack of affordable housing. This would also include millennials like Sigrist and Dickison wanting to be homeowners.
For example, Charles Maurer, a real estate agent based in Cleveland, said he could put a house listing up on a Friday morning and "get 50 to 60 calls by that afternoon" and likely have the home sold by Sunday night.
"Houses used to be on the market for weeks, sometimes months at a time," Maurer said. "Now we're surprised if they're not sold within two or three days."
Maurer, who said about 70% of his clients are middle-class, believes that "they are what drives this country's economy and have to be made a priority" when it comes to housing.
Last year the median price of an existing single-family home jumped to an all-time high of $357,900, up 23% from a year earlier, according to the National Association of Realtors. About 94% of 183 metropolitan areas that were measured notched double-digit gains, up from 89% from the previous year, the organization said.
Home shortage of around 6 million
It was long thought that housing shortages occurred in only certain regions of the United States, such as the Northeast and Midwest, but now “the underbuilding gap extends across almost every major city in the country,” the Realtor-commissioned report said.
The report also said the housing unit shortfall ranges between 5.5 million and 6.8 million, despite an annual average of 1.5 million new housing units completed in the U.S. and a 1.7 million spike in 2020 alone. "New construction would need to accelerate to a pace that is well above the current trend, to more than 2 million housing units per year" to close the gap, the report said.
"Even if building were to continue at the current level – the most rapid pace in more than a decade – it would still take more than 20 years to close the 5.5-million-unit housing gap," the report said.
The report came several months before House Democrats passed President Joe Biden’s now-stalled $1.75 trillion Build Back Better Act. The bill includes about $170 billion for what presumably would be the nation’s largest investment for affordable housing, with a goal to build or preserve more than a million affordable homes.
Housing market outlook for 2023
That 1 million figure, however, may only scratch the surface. Jessica Lautz, the Realtor association's vice president of demographics and behavioral insights, estimates a nationwide shortage of between 4.5 million to 6.5 million housing units.
While the association doesn’t estimate the shortfall of affordable versus higher-priced homes, Lautz said that "it could be argued the vast majority of homes needed today would be affordable properties as prices continue to rise out of reach to potential home buyers."
“There’s far more demand but less supply for housing overall,” Lautz said. “Naturally, affordable housing falls into that same category.”
There’s long been a shortage of housing before the pandemic, said Jodi Hall, president of Nationwide Mortgage Bankers. Now the problem may be further compounded, Hall believes, by materials “sitting in the Suez Canal” because of hundreds of container ships being stuck on either side of the canal.
Hall also said there's a lack of incentives to build affordable housing, adding that the rising costs of supplies to build homes is a primary reason.
First-time homebuyers must be 'the quick and the creative'
"First-time homebuyers need to be aggressive wherever they can to win outright," Hall said. "It's a big battle out there."
Brittany Lambrechts Camacho knows full well about the dearth of affordable housing. Based in the uber-competitive Washington, D.C., and northern Virginia markets, she said she's never seen anything like this in her 16 years as a real estate agent.
She said first-time homebuyers now have to possess other traits besides having the money to get that house.
"They must be the bold, the fast, the quick and the creative," she said. "Lace up your sneakers and let's go."
Lambrechts Camacho said middle-class and homebuyers in general also may have to make some concessions, including paying over the listing price, buying the home as-is and waiving inspections in order to be in the chase.
"These first-time homebuyers are doing what feels like insurmountable things to get a home, and that makes me so sad," Lambrechts Camacho said.
Deal sweeteners to close out the sale
But that's the way the game is played today as homebuyers might have to add "deal sweeteners," said Bullock, the real estate agent in the metro Charlotte area who helped Sigrist and Dickison get their home.
Those "sweeteners" could include paying any fees associated with due diligence (examining the physical and financial condition of the property and the area where the property is located), paying the seller's attorney fees or paying cleaning costs after the seller leaves the home. Buyers might allow the seller to stay in the property a month for free after closing as well as other contingencies, Bullock said.
"As a buyer, you might not have a lot of skin in the game money-wise, but you might have something that would be desirable to a seller," said Bullock, who urges homebuyers to have resources available ahead of time in case they must "pad their offer."
Sigrist, a software engineer, and Dickison, an interior designer, were grateful that Bullock, who worked overnight to help them with their offer, was available to guide them through their options.
Sigrist recalls the restless nights hoping their bid would be accepted. Dickison remembers that her heart was racing as well. "I kept saying, 'Maybe this is our shot,'" Dickison said.
The couple's new home keeps them within their neighborhood, near the apartment where they have lived for five years. With the move, Sigrist can still drive only 15 minutes to work downtown and Dickison will soon commute via rail.
They have big plans, as Dickison sees their new home as more than just an investment.
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