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16 | M R EP O RT COVER STORY negatively impacted existing homeowners, who are strug- gling to find materials necessary for renovations and appliances that need replacement," Kushi said. "This could keep some existing homes off the market, as homeowners who wish to list their property have to wait for materials and labor to make improvements. A lack of new- and existing-home inventory is contributing to a historic hous- ing shortage relative to demand, which puts upward pressure on home prices." An Emerging Market Seeks Their Share G rounded by a pandemic that kept people from traveling and curbing spending, Americans were saving more than ever before. Adding to this savings was the $2.2 trillion economic stimu- lus bill passed by the 116th U.S. Congress, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), putting more money into the pockets of Americans. An increase in savings and the ability for some to work from home opened the doors for a new market of homebuyers. Once crammed into major metros, these workers now had the ability to reach out into less populous regions, areas with more acreage for the kids to run around and homes with more square footage to house one, if not two, parents now working from home. First-time and step-up buyers had new competition: investors and second-home buyers who now further threatened the ever- shrinking piece of the American housing pie. Redfin has reported real estate investors and second-home buyers purchased 18.4% of the homes sold in the U.S. during the fourth quarter of 2021—a record high—up from 12.6% a year earlier. Investors bought 80,293 homes in Q 4 alone, up 43.9% year over year. "Investors buying up a record share of for-sale homes is one factor making this market difficult for regular homebuyers," Redfin Economist Sheharyar Bokhari said. "It's tough to compete with all-cash offers, and rising mortgage rates have a smaller impact on investors because they often don't use mortgages at all. If home-price growth slows in the coming year, investor demand may cool down because rental price growth will slow, too." First American Deputy Chief Economist Odeta Kushi noted, "The housing market was facing a significant supply shortage even prior to the pandemic, but that deficit has since grown. Builders are facing multiple supply-side headwinds that make it difficult and more expensive to build, including a lack of construction material and appliances, a chronic construction labor shortage, and higher input costs. All these challenges are increasing the time needed to build a home and contributing to higher new-home prices." Is There an End in Sight? I n what seems like a vicious and non-stop cycle, the impacts of today's supply chain issues on the housing market are far-reaching and may leave a lasting impact on the housing marketplace. But what is being done on a temporary basis to alleviate the issue? "There is talk about eliminat- ing some of the tariffs that were put into place during the past administration, but even that may not help in the short-term," Stone noted. "The supply chain needs to return to normal, but that's not going to happen quickly. I don't see an immediate solution. However, I do think you will see the labor shortage issue take care of itself by the summer. That's the first step. The supply issue will probably take nine months to one year to get relatively resolved, and then you may see a real surge in new home construction." Kushi added, "One potential remedy to deal with supply chain issues is to switch to alternative comparable materials. However, this may not always be a cost- effective or sustainable solution." One such alternative being explored is manufactured-housing, an industry which has acceler- ated due to supply-chain disrup- tions and labor-supply shortages. According to the latest Texas Manufactured Housing Survey (TMHS), manufacturers expect even faster growth in this market during the first half of 2022, as industry optimism has prompted a flood of capital expenditures and operational expansions. "Manufactured housing is cen- tered on driving as much efficien- cy into the home-building process as possible," according to Rob Ripperda, VP of Operations for the Texas Manufactured Housing Association. "That means homes from plants get built with less labor and less materials wasted. Given widespread inflationary pressures, manufacturers are bull- ish that their value proposition will only look better as site-built producers get hit harder by rising costs and interest rates." Sharga added that lenders may play a role in a short-term solu- tion as well. "Fixing the global supply chain is way above my pay grade, but from a building and repairing standpoint, in the short-term, it comes down to adjusting schedules, adapting plans to use alternate materials and supplies, working with multiple suppliers, and building in room for unan- ticipated price increases," Sharga said. "Lenders need to keep this in mind, as well when they're pre-approving borrowers: the ultimate purchase price may be higher than what was originally submitted on the loan application; if the borrower doesn't have cash reserves to make up the differ- ence, the loan may need to be reworked, and quickly." A Return to the Days of Old? M any wonder when these forces impacting the hous- ing market will eventually align and bring normalcy to both the nation's housing inventory issue and the supply chain issue. A 12- to 24-month timeframe is a solid estimate projected by most as to when the market will find a sense of stability once again. "Most supply chain analysts "I think the net result of all this is, five years from now, we'll have a much more efficient supply chain, and we'll probably have a much more consistent pricing regime because of it." —Pat Stone, Chairman and CEO, Williston Financial Group