Single-Family Homes Are Increasing in Popularity – Why?

If you’ve watched the news over the past year, you’ve probably seen how the market for single-family homes is scorching. According to the U.S.  Census Bureau, nearly 840,000 single-family homes sold in June 2020, at the height of the boom. 

While the numbers are slowly ticking down, June 2021 still saw over 675,000 single-family homes sold. The number of homes sold and the deals speed impact prospective homebuyers and people who currently own single-families. 

If you’re curious how the popularity of single-family homes may impact your options in the future, here’s what to know.

What is Causing the Increase in Demand?

The current surging demand for single-family homes is the culmination of various factors over the last few decades.

The first is a housing inventory shortage. The demand for single-family homes has outpaced building supply for a while. As of late 2020, there were about 213 million single-family homes in the U.S. However, that number still falls short of current demand by nearly 4 million homes.

The reason for the current shortage has to do with a couple of factors. The first goes back to the 2008 market crash and the Great Recession. Housing starts plummeted in 2008 through 2010 and only slowly began reaching pre-recession numbers in 2020, with many of those homes bought by investors looking to use them for rental and vacation Airbnbs.

Another key factor has to do with the COVID-19 pandemic. Due to safety concerns in early and mid-2020, many builders stopped working. That led to a delay in new single-family homes on the market. The work slowdowns also impacted lumber yards, driving up the prices of home supplies through mid-2021. The record-high numbers also delayed and slowed down many new housing builds. The prices are now dropping.

Finally, a recent shift to remote work due to the pandemic has also changed housing. With people working remotely, they had the opportunity to move locations. As a result, Millennials who lived in rentals and cities chose to move to more affordable areas and buy single-family homes. 

If you’re curious how the popularity of single-family homes may impact your options in the future, here’s what to know.

What Does it Mean for Single-Family Homeowners?

That’s a lot of information to take in, but there’s still plenty of good news, and opportunities abound, especially for single-family homeowners. 

More new single-family homes are under construction, but with a market that’s still tight, sellers are in a good position because there still is an inventory shortage. Some analysts are looking at the lower single-family home sale numbers this summer as a sign we might be at the start of a housing cooldown. 

While that likely doesn’t mean things will go back to pre-pandemic levels right away, the market might not be as competitive as we’ve seen the last few months. So if you’ve thought about downsizing or selling your suburban home and moving to a more rural area, now could be an excellent time to explore your options.

What Does it Mean for Buyers?

For single-family buyers, a potential housing cooldown in the coming months coupled with an increase in new single-family home builds may mean the bidding and buying process won’t need to move so quickly.

As of early July 2021, single-family home listings are up 4% compared to the same period last year and are finally higher than even pre-pandemic levels. Another encouraging stat is a June monthly housing sentiment survey that found more homeowners say it’s a good time to sell, up from the last few months.

Low mortgage rates also provide a boost for potential single-family home buyers. While 30 year fixed rates were up this Spring, the numbers are starting to go down again; the same is true for 15 year fixed rates and some adjustable-rate mortgages.

What to Watch Moving Forward

The COVID-19 pandemic helped expose a perfect storm of increasing demand and coupled with a shortage in supply. However, the data shows that the economy is opening back up, and more people are vaccinated. And with increasing new builds scheduled, things will continue to get better in the single-family housing market.

As we move throughout the rest of 2021 and into 2022, experts predict the housing supply will continue to grow, and demand will begin to shrink a bit. The Mortgage Bankers Association (MBA) forecasts over 1.1 million single-family housing starts for 2021 and even more in 2022. In addition, construction industry forecasts expect to see a 12% increase in new builds for single-family homes over 2020. 

While it has been a rocky year for homebuyers and sellers, things look to start returning to normal sooner rather than later.

At OVM Financial, we’re here to help you navigate the process every step of the way. So, if you have questions about anything, get in touch. And, if you’re ready to start your application process, use our easy QuickStart application.