Today’s post-housing bubble world is still on the upswing. Good news for realtors and home buyers, right? Unfortunately, that depends on the market segment. Though in some segments of the country housing remains affordable with inventory aplenty, for many others low inventory is dragging down the market, particularly in the lowest priced third.
How bad is it?
Overall June listings are down 6.5% from this time last year, and in the lowest priced third of the market, inventory has declined in 28 of the nation’s 35 largest metro areas. Some of the hardest hit:
- Charlotte, NC
- Overall supply: -39.7%
- Lower tier-priced homes: -48.7%
- San Antonio, TX
- Overall supply: -31.3%
- Lower tier-priced homes: -63.9%
- San Diego, CA
- Overall supply: -30%
- Lower tier-priced homes: 49.4%
Starving for inventory
First-time homebuyers and buyers in lower priced segments of the market are facing increased competition as inventory continues to dwindle, creating problems in a climate of rapidly rising rents that are outpacing home appreciation. Low mortgage interest rates are increasing the attractiveness of homeownership in light of this. In addition, millennials, previously sidelined, are now expressing interest, driving up prices and putting further strain on buyers looking for homes in this segment.
Who hit the brakes?
They aren’t selling. Some are waiting to recoup value lost when the bubble burst. Others aren’t ready to trade-up or downsize.
Cautious since the recovery, builders aren’t building, adding only 700,000 homes to last year’s market, down from the 1.6 million added in a normal housing market. This limits upgrade options for current homeowners.
Stricter lending practices make securing a mortgage more difficult across the board.
- The economy.
Damaged balance sheets from the recession and stagnant wage growth continue to hold homeowners back.