Delaware’s Current Active Inventory Is Concerning
Delaware’s low home inventory is not a new issue that the market is facing, but it’s been exacerbated by the pandemic as homeowner activity and demand in homes continues to skyrocket. Delaware’s current active inventory is down 55% from a year ago, but the number of units sold has increased by 29% since last year. Homes are spending just 37 days on the market on average compared to 64 days last year, leading to fierce competition. The strain on agents throughout the state is palpable, echoing similar sentiments felt throughout the nation.
Why Is the Housing Inventory So Low?
Real estate experts expect to see six months of supply on average to meet housing demands without prices drastically rising. Currently, Delaware’s supply is 1.1 months, which is well below what’s required to have a comfortable cushion of homes available. There are a few factors that have led to the current state of home inventory in Delaware:
Number of Homes Listed - Due to the pandemic, the number of homes listed on the market dropped in the beginning of 2020. As the demand for homes rose, so did the number of homes listed in Q3 and Q4 of 2020, increasing by 35% year-over-year. While this sounds like a solution to the dwindling home inventory issue, these newly listed homes are flying off the market so quickly that they don’t even come close to meeting the current demand.
Increased Demand - As mortgage rates continued to decrease well below 3%, buyers jumped on the opportunity to capitalize on either purchasing their first home or finding an upgrade. This surge in demand significantly increased home prices while cutting into the available home inventory.
Increased Migration - The rise in demand stems from both in and out-of-state homebuyers, with many coming from California, Nevada, and Texas. Home sales have increased by 30% in the Northeast, ushering in a historic migration.
Lack of Development - New construction never rebounded from the burst of the housing bubble back in 2008, leading to a lack of new units built. Now, almost 12 years later, we’re starting to feel the sting. To add onto this issue, the pandemic has dealt a significant blow to new construction plans. Compared to last year, new private project bids were down by nearly 9%, and new public opportunities were down by almost 4%.
Graph source: FRED
Will There Be New Development in 2021?
Investors and developers both see the current inventory issue but are so backed up due to pauses in construction during the pandemic that new contracts aren’t being accepted. Add to this the increasing cost of materials and a shortage of resources, and you have the perfect recipe for low inventory.
Plans for new developments are on the horizon, but uncertainty still surrounds COVID-19, and returning to normal working conditions is unlikely, at least in the immediate future. Delays, rising costs, and COVID-19 safety protocols will continue to affect new construction as developers are forced to build with fewer workers and less resources, leading to stalled openings and higher priced new homes.
How Does This Issue Impact Clients?
Buyers will need to be prepared for a bidding frenzy, and, as their agent, you need to do your best to prepare them for what to expect when entering a competitive market like this. Communicate with them regularly and listen to their needs. Explain to them that they need to be organized and ready to move quickly on a home when the opportunity presents itself.
Sellers will have to be ready too, though they’re likely to find more joy (or at least more money) in the process. In December 2020, the average sale price in Delaware was 99.6% of the average list price, meaning that sellers will likely be paid their asking price if not more due to fierce competition.
Take On 2021 With the Best Delaware Real Estate Courses From The CE Shop
Enroll in our Pre-Licensing program now to get your career started and begin connecting your fellow residents with the home of their dreams. Or keep going strong with one of our comprehensive, 100% online Continuing Education packages. Want to stay up to date on everything in Delaware? Join the Mid-Atlantic Real Estate Facebook Group!