For quite some time the number of available homes for sale has been considerably less than the number of buyers. I just received a new report today, which says that there are now 9% less homes for sale then there were a year ago. And in some areas of the country, it’s even worse. In Columbus Ohio, San Jose California and Minneapolis Minnesota, it’s around 30% less homes than were available a year ago. Here are a few reasons why.
The demand is high because the millennial generation has reached their prime home buying years. And they’re entering the market big time.
Another reason is that the levels of new construction is not sufficient to keep up with the demand. And what new construction there is, is usually priced beyond the reach of the first time or entry-level home buyer.
Another reason is that so many of the single family homes in the lower price ranges, were the homes that the first time buyers snapped up. What is exaggerating the situation is that the lower-priced homes that the entry-level buyers were previously purchasing, are being bought by investors and converted into rental properties. When these first time homes get sold, the sellers from that move up, and their sellers move up, until eventually someone is downsizing and moving into the adult communities. But since these properties are being held as rentals, they are not contributing to the entire cycle of everyone moving up. As a result buyers are being frustrated and they are ready to pounce on that perfect home when it becomes available. But there are multiple buyers looking to pounce on that same property.