Perspective

Increasing the Inventory of Affordable Housing

• by Robert Rakowski
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Working Together to Make a Difference By Robert Rakowski HomeVestors®, the “We Buy Ugly Houses®” company, is playing an important role in addressing the housing inventory crunch with the current U.S. housing Inventory at 51% of pre-pandemic levels. This is especially true for first-time buyers. Potential homebuyers are seeing fewer fresh listings as sellers have stepped back even further. In April, new sales listings decreased, defying normal seasonal trends. According to Zillow, total inventory is up just 3% annually and while buyers are still scooping up what they can find, they are hindered by a lack of choices. Massive home price appreciation, combined with mortgage rates that doubled in 2022, has made both down payments and monthly mortgage costs much tougher to afford. Several forecasters expect affordability to improve slightly over the next year, but high demand for homes and stubbornly low supply will prevent a return to pre-pandemic norms.  A report recently released by ServiceLink shows that complicated market conditions are leading some homebuyers to abandon the homebuying process. For example, their study cites that almost half of the respondents surveyed considered buying a new home in the past 12 months, but ultimately decided against it. And over 50% of those respondents said their buying options were too expensive. These percentages are considerably higher than the studies cited in 2022. In real estate, for every action there is always a reaction. When supply is lower, demand is usually driven up; when supply increases prices are likely to lower. As months of supply for existing home sales remain near all-time lows, contributing additional and improved housing inventory enables more low-and-moderate income and first-time homebuyers to access affordable housing. The average sales price for a newly built home has climbed to $543,600, but the average resale price of houses from a “We Buy Ugly Houses” franchisee is around $254,000. At HomeVestors, when independent business owners buy and revitalize houses, they actually increase the inventory of affordable housing. On average it takes less than 120 days for franchises to reintroduce rehabbed houses to their local markets as desirable properties for new buyers. Many of the houses that they buy would not typically qualify for conventional or FHA/VA financing due to their poor condition. The time and work of the franchisees, which includes hiring subcontractors, paying for the subcontractors, buying materials, etc., makes it possible for these houses to qualify for a mortgage. Additionally, they pay all normal closing costs, do not charge real estate commissions, and the sellers don’t have to worry about cleaning and showings. When a franchisee buys a house, closings sometimes occur in as little as three weeks. Their offers are based on the money invested in repairing the property and the money sellers save on associated transactional costs. The independent business owners do more than their We Buy Ugly Houses motto suggests. They also help people with Solutions for Ugly Situations®, be they tax liens, probate, inherited homes, etc. Whatever the situation, issues are navigated face-to-face with the seller and not merely online. Since HomeVestors’ founding, their franchises have purchased over 140,000 homes, the vast majority of which have returned to market as “mortgage-eligible,” via a national network of over 1,100 franchises across the continental United States. However, solving both the housing affordability and inventory issues is an arduous task. And it will take time to fix a situation that has been spiraling out of control for years. The good news is that the HomeVestors independent business owners are some of the best and brightest leaders in the real estate community. By everyone working together, investment companies, lenders, builders, service providers, etc., the inventory crunch and affordable housing crisis can be solved.