“All offers to purchase must be signed by 10pm Sunday evening. We are scheduling preview appointments during published business hours now through Friday, March 5th. Please note-due to demand, we anticipate receiving multiple offers on many of our available properties & are advising customers to put forth their highest & best offer for consideration.”
That kind of notice in a listing has become very typical in the Austin area over the last couple of years. This example represents a relatively new trend, however, because here is what appears before that notice in the same listing notes:
“UNDER CONSTRUCTION – EST COMPLETION TBD.”
Surprised? The house hasn’t been built yet. In fact, the developer is still cutting in streets and hasn’t started construction on the first house in the neighborhood. There is a price on the listing, but the builder expects to get more … maybe a lot more. They will undoubtedly have a wait-list ready when they get close enough to be confident about their costs and completion time, and they’ll notify prospective buyers to submit “highest and best” offers for consideration.
Not all builders have gone quite this far … yet … but virtually all are keeping wait-lists of some sort and rationing construction, starting far fewer homes each month than the number of ready, willing, and able buyers available. There are two primary reasons: (1) they do not have enough approved, buildable lots to serve existing demand and they know that it can take two years or more to turn raw land into permitted lots, and (2) the cost of building materials has skyrocketed over the past year and is expected to keep rising. Understandably, builders don’t want to make promises for homes and prices too many months in the future, and they don’t want to reach a point at which they have to stop completely.
As a consequence, new construction is not the refuge for frustrated home buyers that it has been over the past several years. Not all that long ago a buyer could pick out a floorplan and a lot, contract at a specific price, watch their home being built for several months, then close and move in. If they had a house to sell, most builders would even take contingent contracts. Now, a buyer may be able to pick out a floorplan and discuss the current price, get on a wait-list, hear from the builder a few weeks or months later with a schedule and a price, and decide at that point whether they want to proceed.
Builders, real estate agents and brokers, and prospective home buyers are all learning how to navigate the most extreme high demand/low supply market environment we have ever seen. More resale listings and faster local permitting processes are critical, and it’s up to all professionals in this business to keep the market moving forward. More variety in the types of housing provided, strict mortgage underwriting requirements, and higher mortgage interest rates may well be parts of the solution too. Keep an eye on real estate as we move into the traditional Spring/Summer real estate selling season. This is a new adventure for all.
With that said, I’ll end on what I truly believe is the right high note: the bright long-term outlook for the Austin area. Elon Musk recently predicted that Austin will become America’s biggest boomtown. The 2021 Hottest Housing Markets report from Zillow ranks Austin at #1 on a list that also includes Dallas (#7) and Houston (#12). The Milken Institute recently included Austin #3 on it’s list of Tier 1 Best Performing Large Cities. We have very real challenges right now, but we will get through this.