Housing market brutal for buyers
Tight supplies, rising prices make it tough for many
This spring home-buying season should be a coming-out party for Millennials, many of whom are finally ready to make a purchase after hunkering down for years in parents’ basements or expensive apartments. The only problem: Much of the food at the party is gone, and what’s left is priced like caviar. Although solid job and income growth is emboldening many prospective home buyers, record-low housing supplies are driving up prices and curbing sales, especially for Millennials looking to buy starter homes.
“This is shaping up to be one of the most difficult years in recent memory.”
Ralph McLaughlin
Chief economist of Veritas Urbis Economics
“For home buyers, this is shaping up to be one of the most difficult years in recent memory,” said Ralph McLaughlin, chief economist of Veritas Urbis Economics, which studies the housing market.
For sellers, it will be a standout spring that brings big profits, unless sellers themselves are looking to buy a larger home in the same metro area. Already, house hunters are waiving inspections, making offers without even seeing homes and bidding well above asking price. Yet Lawrence Yun, chief economist of the National Association of Realtors (NAR), predicts sales will be flat compared to spring 2017 because of skimpy supplies and reduced affordability for many buyers.
Some of the hottest markets in recent years — such as Seattle, Las Vegas and San Jose — have continued to post double-digit annual price increases. Now, they’ve been joined by cities such as Nashville, Salt Lake City and Kansas City.
Why? Too many buyers chasing too few homes. In February, there was a 3.4-month supply of existing homes nationally, lowest on record for that month and substantially below a balanced six-month inventory, NAR says. The number of starter homes is down 14.2% in the first quarter from a year ago, real estate research firm Trulia says.
Not that there aren’t buyers’ markets. Sales have dipped over the past year in Hartford, Conn., Toledo, Ohio, and Baton Rouge and were flat in Philadelphia and Baltimore, according to Attom Data Solutions.
Yet nationally, the median home price in February was up 5.9% from a year earlier to $241,700, NAR says. Meanwhile, average yearly wage growth has been stuck at about 2.5%.
In the Las Vegas area, the median home price has jumped about 12% over the past year and doubled the past five years, Attom figures show. Homes priced below $200,000 typically draw 15 to 20 offers, said Chris Bishop, managing broker of Coldwell Banker Premier Realty. To stand out, some bidders are writing letters to sellers, detailing what they like about the house, said Rob Pistone, a broker at Keller Williams Realty.
Homes stay on the market 41 days on average, down from 52 days a year ago and a typical six months. Besides Millennials, demand is fueled by “boomerang buyers” who may have lost homes to foreclosure during the housing crisis and recently repaired their credit, Bishop said. Las Vegas was hit especially hard by the crash.
Millennials, in particular, aren’t short on enthusiasm. More than a third of all home purchases were made by Millennials in the 12 months ending last July, making the group the most active generation of buyers, according to a NAR survey.
At the same time, builders are grappling with construction worker shortages that have delayed projects and driven up prices, as well as soaring material costs, limited land availability and onerous regulations.
Existing homeowners, particularly Generation Xers, would like to move to bigger homes but fear not finding one or having to shell out much more for it, said Joe Melendez, CEO of ValueInsured, which insures buyers against house price declines.