Bernice Ross

Prices for wood, steel, copper and other building materials are soaring. The annualized rate of inflation jumped to from 0.8 percent in March to 4.2 percent in April. Couple these facts with the end of COVID-19 mortgage forbearance, the end of the eviction ban, plus the oldest Baby Boomers turning 75 this year, and inventory increases may occur much sooner than anyone anticipates.  

Existing-home sales have held steady at about 5 to 5.5 million per year for some time. Despite the pandemic, existing home sales reached 6.76 million nation-wide last year. And NAR put the current pace of existing home sales at 6.01 million in March. Other experts project the rate may be as high as 7.1 million.  

This high demand is being driven by three primary forces – pandemic-motivated moves, a wave of prime homebuying-age Millennials and an uptick in the number of investors in the market, including flippers and iBuyers – and it’s creating pain for buyers and buyer’s agents everywhere. 

Owners Avoiding Foreclosure 

More than 2.1 million homeowners who were enrolled in forbearance programs were seriously delinquent (90 days or more behind) on their mortgage payments as of January. Without a clear path to reinstatement, these delinquent homeowners will be headed for foreclosure upon exiting forbearance. 

While it is unclear what the new rules will be, the Consumer Financial Protection Bureau’s moratorium on lenders filing Notices of Default (NOD) should be in place at least through Dec. 31.  

Since lenders will be unable to file NODs until 2022, these 2.1 million at-risk homeowners have a window in 2021 where they can sell in today’s heated market, retain most of their equity and also protect their credit. For agents who know how to counsel homeowners who are in default, there is a huge opportunity to get these properties listed now.  

The Centers for Disease Control’s eviction moratorium has also hit mom-and-pop landlords especially hard. It’s almost impossible to sell a rental property when you have no way to evict a tenant who is not paying rent.  

When the eviction moratorium ends at the end of this month, owners who have been struggling with ongoing expenses and significantly reduced cash flows will finally be able to sell to their properties.  

iBuyers Priced Out 

While this is happening, some iBuyers, investors and flippers are running into serious obstacles. If you haven’t been following what’s happening in the commodities market, the cost of plywood has increased approximately 250 percent and wood sheathing is up 287 percent, largely due to the shutdown of lumber mills and other production cuts due to COVID-19, while many other building materials are seeing similar surges.  

Making matters worse, a truck driver shortage and increasing gasoline prices are also adding to the skyrocketing prices and the construction industry is experiencing a huge shortfall in the number of construction workers.  

Many have noted how these costs put a crimp in new home construction. But what no one seems to be noticing, however, is that flippers, iBuyers and investors are seeing their renovation budgets and schedules disrupted, too, increasing their holding costs. This is a huge issue, and could reduce the number of powerful buyers in the market.  

The Wedge that Breaks the Dam? 

The Baby Boom generation, those ages 55 to 75, comprise 22 percent of the U.S. population but account for nearly 42 percent of homeowners nationwide. While 76 percent would prefer to remain in their current home rather than moving in with family, to a nursing home or into an assisted living center, there’s one hard fact that no one is discussing: life expectancy.  

The current life expectancy for men in the U.S. is 76.1 and 81.1 for women. These statistics have three interesting implications for the inventory currently held by boomers. This five-year difference in male and female life expectancy is significant. When women lose their spouses, they can be unable, both physically and financially, to afford the upkeep on their current home.  

What’s particularly challenging are the soaring commodity prices noted above. This is especially problematic when these increases outpace inflation and cost-of-living-adjustments in Social Security and pension benefits. And in communities where property taxes increase with current market valuations, this can often force a senior to sell, no matter how much they would like to stay in their current home.  

In fact, in the 55-plus community where I currently live, the amount of turnover has increased significantly from just two years ago compared to when I moved in. Given that a substantial proportion of our residents are over the age of 70, this trend will only continue to climb over the coming years.  

Given the soaring costs we’re seeing in almost every aspect of our lives, the end of forbearance programs and rent moratoriums, coupled with the age of Boomers – who own 42 percent of the nation’s single-family homes – the dam is indeed leaking. That leak may very well turn into something much bigger and ease the current inventory shortage. 

Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.