We find that today we have three different realestate markets. We’re in a situation where there’s a mismatch between the type of available homes and buyer’s demand. This has caused two distinct real estate markets.

Starter and Trade Up Markets

First let’s talk about the starter and trade-up categories. In this market there are considerably more buyers than sellers. This has caused a seller’s market where the old law of supply and demand rules in favor of the sellers.

Premium Markets

Next comes the luxury, or premium markets. You know- the McMansion market. Here we have the opposite effect. There are many more sellers in this market than there are buyers. And, you guessed it, this created a buyer’s market.

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Let’s continue.

So we have established that the lower priced homes have a different market than the luxury or premium homes. And this is due to differing amounts of buyers and sellers. But what is the third category?

Active Adult Community Market

And that is the active adult community market. You see, us Baby Boomers are ready to move into smaller homes. The kids are gone and we don’t need the large house anymore. And we don’t want to do all the maintenance. We would rather be in a place where someone else cuts the grass and shovels the snow. And where we can be around people our own ages with similar interests. The big old house is in a neighborhood where the young adults are moving in and raising their own families. Like we did. But it’s time for us to move on. And more and more of us are doing just that. And it is creating a bit of a seller’s market in the adult communities.

But here is the difference. The sellers in adult communities aren’t moving for a larger home – or a smaller one. They are moving to the next phase of their life. It may be they feel the need to move closer to their kids, or they need assisted living, or maybe they have just passed away. But there is a shortage of available homes, just not a severe one. However, the people who are buying need to wait until they sell their existing homes.

Bottom Line

So it all starts with the starter homes. When they sell, the sellers move to premium homes, and those sellers go to the adult communities.

And there are simply not enough starter homes available.