While number-crunchers are pretty good at predicting market fluctuations, it's remarkable how a “black swan” event like a global pandemic can throw those predictions out the window. At a time when millions are actively fleeing cities and looking for more space to “quarantine at home,” housing inventories across the country have been astoundingly low over the past year, according to a report by the New York Times.
Driving Factors Behind the Shortage
What is causing such a drop in housing availability? Inventories were already dropping before last year, but the pandemic seems to have amplified this trend. Experts point to several key factors in play, all related in some form to the pandemic:
- Seller reluctance. The Times reports that many houses that would likely have gone up for sale last year didn't. The reason? Homeowners decided to stay put. Quarantines not only kept owners closer to home, but they also made them reluctant to open their homes for showing for fear of exposure to the virus.
- Reduced foreclosure rates. Despite the economic hardships brought on by the pandemic, millions of homeowners with government-backed loans were granted forbearance and protected from foreclosure due to the moratorium. As a result, the number of foreclosed homes on the market has been considerably below what is typically available in a given year.
- Increased demand. A third driver in low inventories is the simple fact that the homes that do come available are getting snatched up quickly. Many buyers, especially those fleeing from high-density areas, have been purchasing homes in the suburbs sight-unseen—and often for cash—taking even more available homes off the market before the average buyer even gets to see them.
One Mitigating Factor: New Home Starts
The housing inventory shortage would probably be even more dramatic if not for one factor pushing the numbers in the opposite direction. The new home construction market experienced a boom in 2020, with new home starts in general up by 7 percent, and new constructions of single-family homes up by 10 percent or more. Much of this growth has been driven by a lack of existing home availability.
If you are a homeowner in NYC facing the threat of foreclosure, don't assume that losing your home is inevitable. While these times are indeed unprecedented, you may have more alternatives to keeping your home than you might think. Call our offices to discuss your case and examine your options.