The Supply Chain Situation
The early part of the pandemic challenged a lot about what we knew of the world. It made us question whether we had to work in the office or if that was just a norm that we got used to following. It introduced us to new terminology, such as ‘social distancing’ and had us questioning how close is too close. It also challenged our notion that staple household goods would always be available after just a quick trip to the neighborhood store. The great toilet paper shortage of 2020 was one of the more jarring aspects of pandemic life. Eventually, toilet paper returned to the shelves and we all thought that weird era was behind us. However, supply chain setbacks are causing products to be available in limited quantities, even toilet paper. While the pandemic is improving, supply chain problems are worsening and it is impacting home buyers.
The Supply Chain Crisis Explained
We are in the midst of a global supply chain crisis and it has drastic consequences for the entire economy, including the real estate market. It is a top worry of nearly every industry, from grocers, to restaurants, to homebuilders. It impacts nearly every aspect of our lives from toilet paper availability to the cost of buying a home. So, if the supply chain issue is this monumental, it is important to understand what exactly it is.
Simply put, the supply chain is the term we use to describe how we get materials and goods from their source into our homes. It encompasses getting the raw materials necessary to make products. It includes the manufacturing of the products that go on our shelves. It even includes the transportation of these products from manufacturers to where they are sold or from stores to our homes. The problem we are experiencing right now is that every single aspect of the supply chain is facing bottlenecks. In turn, we are witnessing an “everything shortage” where many products are hard to find, and when we can find them, they are more expensive.
The supply chain crisis started with the COVID-19 pandemic. As the virus spread around the globe governments had to take extraordinary steps to try and limit it. This included things such as curfews or even shutting down entire industries. The problem was even more pronounced because China was the epicenter of the initial pandemic. A large number of goods and raw materials that economies all over the world rely upon come from China. So, as the Chinese government issued strict locdowns to control the virus, they also turned off the supply chain nozzle. Unfortunately, the pandemic has lasted longer than anyone wants and so too has its impact on the supply chain.
The initial disruptions caused by the pandemic created backlogs in everything from mining, to manufacturing, to shipping, to warehouses. Currently, container ships are blocking nearly every major port in the United States. Dockworkers cannot handle all of the materials and goods that have been shipped from overseas. Unfortunately, the problem does not stop there. There is a large shortage in the number of truck drivers necessary to move these goods from ports to warehouses and eventually stores. Shipping times are taking much longer than usual and the price of shipping has gone up dramatically. In turn, the prices of materials and products are increasing because they have to make up for shipping costs.
Supply Chain Disruptions Impact the Real Estate Market
Disruptions to the supply chain have far wider consequences than limits on toilet paper at your local Costco. They also make it much more expensive to build a house. Homebuilders have been particularly impacted by the supply chain crisis. For homebuilders, nearly everything they need to build a house is more expensive and harder to find. It is taking them months to fill orders of everything they need, including pain, garage doors, HVAC, windows, and much more. The challenges that the supply chain is imposing on homebuilders also causes headaches for home buyers.
Much has been written about how low housing inventory has been detrimental to home buyers. The demand from home buyers has been through the roof because of rock-bottom mortgage rates. The big problem is that there has not been enough available inventory to meet the demand from home buyers. There are simply too many people who want to buy a house, but not enough houses to buy. Homebuilders have recognized that this is a great opportunity for their industry and have desperately tried to step up and build more houses. New home construction starts have increased steadily all year. However, the lack of building materials has meant that they cannot finish them quick enough. Starting a home build is good, but that is not what helps the available inventory. It is finishing a home build that is important, and the supply chain issues have been a large impediment.
Final Thoughts
The supply chain crisis will not last forever. As the pandemic recedes, the supply chain problems will start to be resolved. In turn, homebuilders will get the materials they need so that home buyers can have the inventory they need to buy the house of their dreams. However, this will take time. This means a couple of things for home buyers. First, do not expect to wait out today’s home prices. A global economic logjam takes a long time to unravel, which means that you could be missing out on rising home values and building equity. Second, building a home over buying an existing home is a risky proposition. While it might sound nice to build something to your exact specifications, it might take longer than you’d like and cost a lot more than you are expecting.
The bottom line is that waiting around for a better time to buy a house is a fool’s errand. Timing any market, including the real estate market, is nearly impossible. When it comes to getting the most house, it is about time in the market, not timing the market. Over a long enough timeline, home values increase. Nobody thought we would see home values surpass those of the runup to 2006, especially when we were in the worst part of the housing crisis, but we did. So, even if you buy at the top of the market right now, that does not mean it will not go even higher down the road.
Additionally, a house is more than an investment. A house is a place you can call your own. It is a place to raise a family and be a part of a community that you love. Buying a home is about giving you a place to put down roots and serves as the setting for life’s most important memories. If you want to buy a house because you want a place of your own, a place to live, and a place to grow, then who cares whether you buy at the top of the market or the bottom.
The simple fact is that there is never a bad time to buy a house if you can afford it. That is why it is important to work with a professional mortgage broker. A quality mortgage broker will never have you buy a house that is going to break your budget. They will work with you to find something that you can afford. At Peoples Choice Mortgage we work with everyone of our clients to make sure that we find a mortgage that meets their needs, which means meeting their budget. As long as you can find a mortgage whose monthly payments are within your means, then you should have no hesitancy in buying a house.
Today’s home prices might be high, but there is a decent chance they could go higher. However, even if they do not, nobody regrets having a home they love as long as they can afford it. So, if you want to buy the house of your dreams, realize that there is no better time than the present. Contact us and let the experienced mortgage brokers at Peoples Choice Mortgage help make that dream a reality.
