Welcome to Part 2 of our two-part series looking at how the current real estate market is impacting relocating employees and mobility programs. Our focus in this post will be on the home purchase side. Buying a new home is a critical element in the process for many relocating employees, so understanding the experience will help everyone prepare for the best outcomes with fewer surprises.
Let's consider what someone who agrees to relocate might be facing from a home purchase standpoint right now. First, we are still working in a COVID-19 pandemic environment where traveling can be more challenging and hence home-finding trips may be something relocating employees would just as soon pass on. That said, so much more can be done in advance or remotely to narrow down the options.
Next, record-low inventory and record-high prices are the reality for many home buyers in most major markets across the country. According to Plus's in-house real estate expert, Kelly House:
"We have yet to see any increase to new listings coming to market that would help stabilize the imbalance of inventory. Further, home builders are reporting increasing costs on materials related to building new construction, which is putting upward pressure on prices. Long story short, it’s still a sellers’ market!"
While this bodes well for the employee selling their departure home, it will likely put them in a destination home search situation where they are looking at paying list price or higher, losing out on multiple bid situations, needing more time to find and secure a new home, and needing their belongings to remain in storage and/or needing a longer amount of time in furnished accommodations due to the purchase process being extended. On the positive side of things, mortgage rates are in a good place, with some predicting that rates will stay below 4% over the next couple of years. Check out this recent post for more on where mortgage rates may be headed next.
There are a number of things we are doing to help prepare buyers to be successful in tight and fast-paced destination housing markets like:
- getting finances in order with cash ready for down payments,
- getting pre-approved for a loan,
- making sure they have "the best realtor" for their locations and needs,
- and being ready for competitive bidding situations.
In this real estate market, what should your global mobility program be prepared for?
As a mobility program, expect increased requests for exceptions, increased costs per relocation especially if moving people into tight and expensive real estate markets, more incidents of employees being outbid on a new home offer, increased periods of time for relocations to be completed, and likely greater degrees of stress and anxiety from employees grappling with a tough home purchase market.
While the March housing market has set numerous records, April signs suggest we may start to see things slow down as we head into May (National Moving Month in the U.S.) and peak season. While we can hope for that, expect many employees to face some challenges on buying their new home in this current market.
February 2021 Existing and Pending Home Sales Inventory challenges remain with record low inventory and record low days on market. More housing supply is needed to tame price acceleration.