It’s January 2023 and you can’t find a home in Massachusetts or Rhode Island. As of the date of this writing, the total number of residential homes for sale in Massachusetts, which includes single family homes and condominiums, is 5,133.
As you can see from the title image, there has been a major drop in homes for purchase in the area. On January 1st, 2018, there were 14,885 homes for sale. That’s a drop in inventory of 190% over 5 years!
So what can you do about it?
Let’s explore some tactics you can put to use to become a homeowner in 2023.
Challenges Home Buyers Face In 2023
This is pretty straightforward.
Buyers have little inventory to consider, are facing higher interest rates and, while competition has dropped, the drop in inventory hasn’t made competition much easier.
What’s a buyer to do?
Buyers can’t find a home and are frustrated trying to find a suitable home within their budget or in their desired location.
I think we need to have a mental reset and redefine a successful home search.
You may need to alter your needs assessment, your budget, and/or your aspirations for finding your long-term home.
I know rising interest rates are a major concern, so let’s talk about all of it here.
No topic is taboo… and maybe we need to reframe the discussion entirely.
Alternative Strategies to Consider In Your Home Search
It’s certainly not my place to tell you how to conduct your search.
However, if you’re not seeing success and can’t find a home, why would you continue to do the same things?
I’m reminded of a famous parable:
Let’s get you some different results!
Consider Homes in Less Desirable Locations or Neighborhoods
Sometimes we just need to be less stubborn. Homes in “less desirable” locations or neighborhoods will certainly come at a lower price and are likely to be less competitive.
Consider, also, that desirability is in the eye of the beholder. It may be “less desirable” to you but still may be in an area where you’ll have no trouble selling in the future.
While I wouldn’t suggest a client live in a high-crime or stigmatized area, perhaps the desirability of an area is a figment of your imagination or irrelevant to your current situation in life.
Maybe you’re considering the school district without having children? If you have no children, consider that most children don’t enter the school system until the age of 5 or 6, so you have a minimum 6 or 7 years before you really need to consider the school system.
Just be willing to open your mind is all I’m saying.
Consider Homes That Need Some Work or Updating
It’s highly likely that homes that need work will be cheaper with reduced competition.
I know it’s hard to consider after the last few years where EVERYTHING was being bid up.
We’re not seeing that as often anymore.
I don’t want to downplay your concerns about the cost of renovations and the availability of contractors.
Those concerns are legitimate.
The cost of construction materials has also risen in recent years.
It doesn’t mean you should ignore opportunities.
Work With a Real Estate Agent Who Has Experience With Renovating Properties
A skilled agent can help buyers find properties that need updating and can help buyers estimate the cost of renovations, which can help buyers make a more informed decision about whether to purchase a home.
As a licensed contractor in the Commonwealth of Massachusetts (Licensed General Contractor: CS-109536/HIC-188354), I am uniquely qualified to assist. I have built homes from scratch and I have renovated dozens of properties.
We would certainly need to have a discussion about your comfort level and the type of work you’re willing to consider, but in an inventory constrained market where you can’t find a home, you need to keep all options open.
Focus on Homes That Need Cosmetic Updates
Not every renovation needs to be massive. Avoid homes that need structural updates because I’ve yet to run into a structural update that’s “minor”.
Updating the paint, flooring, fixtures, and appliances can make a big difference in the appearance of a home and can be done relatively inexpensively.
If you’re willing to get your hands dirty, most of these types of renovations can be downright cheap and provide you with a major equity boost.
Look For Recently Renovated Homes That Have Not Sold
I know this one sounds weird, but nearly every municipality in Massachusetts has put many of their records online, including building permits.
You can do a search for homes with recently closed building permits and work with your agent to craft a reach out strategy.
Many people decide to update their home prior to listing it, so you could come across an opportunity that never makes its way to market.
This could help you to avoid a bidding war and get the property at a lower price.
Consider A Renovation Loan
There are many types of renovation loans out there.
I’m not saying they’re easy, because they’re not.
They can be a bit of a pain… but if you start down this path and come across a property that needs work, you could move faster than another buyer who hasn’t started down this path.
You can look for homes that say things like “handyman special” or “will not pass FHA financing”.
At that point, it’s a matter of your comfort level with a property that needs some attention.
You may be concerned about how you protect yourself from buying a money pit. Consider that you’ll still be having a home inspection. If a home inspection finds items that are outside your comfort zone, you’ll have the option to exit the purchase at no cost to you if you have an agent that structures your contract properly (beyond the cost of the inspection). You can also purchase, or request the seller purchase, a home warranty.
Look for Properties That Have Unique Features or Character
Some buyers may overlook properties that need updating because they don’t have the latest finishes or appliances. However, properties that have unique features or character, such as original hardwood flooring, crown molding, or a fireplace, can be worth considering, even if they need updating. These features can add value to the home and make it more desirable to buyers.
Consider the Location
The location of the property is often more important than the condition of the property. Properties located in desirable areas, even if they need updating, can be more valuable in the long run.
Consider the Future Potential of the Property
Some properties that need updating may have potential for future development, such as a basement or attic that can be finished, or a large lot that can accommodate an addition or an in-law apartment. It’s important to consider the future potential of the property, as it can add value to the home in the long run.
The Renovation Elephant In the Room
I’m not here to blow rainbows up your backside.
Renovations can be expensive, especially when you factor in the cost of materials.
The cost of materials for home renovations has risen in recent years, and the trend has accelerated in the past few years due to a number of factors, including supply chain disruptions caused by the COVID-19 pandemic and increased demand for home renovation projects.
Heck, over the last year, the price of renovations has risen 19%.
According to the National Association of Home Builders, the cost of lumber has increased significantly in recent months, with some reports indicating that lumber prices have more than doubled since April 2021. The increase in lumber prices has been driven by a combination of factors, including increased demand for new housing construction, supply chain disruptions caused by the pandemic, and a lack of available trucking capacity.
Additionally, the cost of other building materials, such as drywall, roofing, and insulation, have also increased in recent months.
According to the National Association of Home Builders, the average cost of materials for a single-family home rose by 2.6% in December 2021, and the price of softwood lumber alone rose by 29.3%.
Renovation Costs Are Up AND You Can Still Benefit
With prices for construction materials and labor rising, it may be more expensive for buyers to renovate a home in the short term. However, these rising costs can also be seen as a sign of a strong economy and housing market. As the economy continues to recover and more people are able to afford to buy homes, the demand for housing will continue to increase, which can drive up home prices.
Keep in mind that housing supply continues to severely lag housing demand.
If you’re able to purchase a home that needs updating now, even with the higher costs of renovations, you may still be able to benefit from the appreciation in your home’s value in the future.
Consider, also, that the rising costs of construction materials and labor may discourage some investors and flippers from entering the market. This will lead to less competition for buyers looking for fixer-upper properties.
Buyers who are able to purchase and renovate a home now, despite the higher costs, may be able to benefit from the appreciation in home values in the future and may also be able to avoid some of the competition in the market.
Consider Short-Term Gains Over Long-Term Stability
Let me translate this for you – you don’t HAVE to find your forever home THIS time.
Instead of focusing on finding a home you can be in for a long time, consider purchasing a home as an investment with the goal of flipping it for a profit. This approach will involve looking for properties that are undervalued and have potential for appreciation or those that can be quickly renovated and resold at a higher price.
This doesn’t mean you’re “looking for a flip” like an investor. You’re looking for a home that may need some work in an area you don’t intend to be in for the long-term. The home should still meet many of your goals, just not your long-term goals.
The point is to get into a home and start building equity rather than standing still waiting for the perfect opportunity.
So let’s address some of the common fears associated with this approach.
Fear #1: Not Being Able To Sell the Property
You may fear that you won’t be able to find a buyer for your property, especially if the market conditions change or the property is located in an area with low demand.
Fear #2: Not Being Able to Make A Profit
You may fear that you won’t be able to make a profit on the sale of the property, especially if the renovation costs are high or the market conditions are not favorable.
Fear #3: Not Being Able To Handle The Renovation Work
You may fear that you won’t be able to handle the renovation work yourself and will have to hire contractors, which can be costly and time-consuming.
Fear #4: Not Being Able To Handle The Legal and Financial Aspects
You may fear that you won’t be able to handle the legal and financial aspects of buying and selling a property, such as dealing with mortgages, taxes, and closing costs.
These are all legitimate fears and is why…
We are in a market with historically low inventory. As a buyer who can’t find a home, you can continue to do what you’ve been doing with no success, or you can alter your strategy.
Part of altering your strategy includes altering your mindset and being open to different areas, different home styles, homes that need work, smaller homes that can fit your needs for the short-term, or homes with unique features that will increase in value over time.
Surrounding yourself with the right professionals can make all the difference in the world.
Now, more than ever, who you work with matters.