The Expert Podcast

If you're looking to become a homeowner anytime soon, you may face serious challenges that you might not even be aware of, hiding in plain sight. This article from Insider says, "Millennials, you'll never get a good home." Well, it's not just millennials—it's really anybody who's not a homeowner right now or anyone looking to transition out of a home. Here are four reasons why getting a good home is going to be nearly impossible right now. Some of these reasons are reflected in the article, and some are not.

The first reason is that there really aren't that many good homes. Look at the houses for sale in the marketplace. The ones that are for sale are not great—they may lack curb appeal, have poor locations, outdated floor plans, bad designs, or be in poor condition. The neighborhoods might even be in decline. Most of the homes for sale are what we call "left-handed houses." No offense to left-handed people—this term refers to homes that aren’t very popular in the marketplace. Remember those shows where people toured four or five houses and picked one to buy? Almost all of those houses were decent. However, housing production hasn't been high in volume for over a decade.

Since the financial crisis of 2008, homebuilders have been slow to produce houses in large volumes. Around 2018 or 2019, there was some momentum, but it didn’t last long. Interest rates went up, the pandemic hit, and there were supply chain issues, shutdowns, and lockdowns. While homebuilding did exist to some extent, it wasn't a high-volume profession from 2015 to 2018. Even when new homes were built, some argue they had lower quality compared to homes built in the '70s and '80s. For instance, we've seen homes with no vapor barriers or siding—just sheetrock against backer board. Older homes, while still available, often have outdated floor plans and designs.

The second factor is that somebody who already has a great home is probably going to keep it. If you're selling your house, unless you're in a situation where you must, you'll need to buy another house to live in. If the house you already have is great, you're unlikely to find anything better in the current market. The inventory is there, but the selection of truly great homes is poor. Someone with a "dream home" will likely hold onto it unless it's an extra house or a second property they want to downsize. Even then, many owners choose to rent it out or list it on Airbnb rather than sell.

The third reason is pricing. Someone who does have a nice, desirable home in a good location, with upgrades and a nice yard, will ask top dollar for it. These homes will also attract a lot of demand. If you're in the market, the chances of securing one are slim because competition is fierce. The best homes are scarce, and when one becomes available, multiple buyers are often vying for it.

The fourth and final reason is interest rates. Many homeowners refinanced their homes to low rates in 2016, 2017, or 2018—some even as low as 2-4%. These rates make it unappealing for homeowners to sell their current homes and take on a new mortgage at significantly higher rates. For them, selling means going backward financially, even if they buy a home of similar value.

All these factors make it difficult for buyers to find a good home. There are houses available, but they are often average or below average and still priced high. Truly great houses are rare, and when they do appear, they sell quickly—sometimes even before being listed on the MLS or Zillow. Realtors often have buyers lined up for great homes, so they never reach the broader market.

For the next five to ten years, it’s going to be very challenging to find a nice house. And that’s a conservative estimate. Builders are currently hesitant to build due to high interest rates, economic uncertainty, recession fears, and inflation. Even if conditions changed today, it would take builders years to ramp up production, and additional years for those homes to hit the market.

This shortage isn't unique to housing. Look at what’s happening with other commodities like vehicles, manufacturing parts, and even groceries—supply shortages are widespread. Houses, with their longer lead times, are no exception. Finding a good quality home in your area without stiff competition will continue to be a significant challenge.