The housing market hopes to hatch out a few more “spring chickens” in 2016, fulfilling some of the pent-up demand from first-time buyers.
While the market is getting healthier as a whole, there’s a surprisingly low inventory of homes available at the entry level.
Current starter-home homeowners haven’t helped much. For various reasons, they have been less willing to part with their greatest asset. Potential first-time buyers have also encountered stiff competition from all-cash investors.
More troubling is the lack of starter home construction. According to the National Association of Home Builders, only about 20 percent of new construction since the recession would qualify as entry-level. Before the recession, that number was closer to 30 percent.
While they still make the largest single segment of home buyers– about 32 percent – first-timers traditionally represent almost 40 percent.
Are builders not building because there are fewer first-timers shopping? Or are first-timers not buying new homes because builders aren’t catering to them?
The answer is somewhat more nuanced than these “chicken versus egg” questions.
High student debt, later marrying ages and a love of the downtown aura pushed many a Millennials into a “devil may care” attitude about home-ownership. “I can’t afford to buy, so why should I even try?” was the mantra.
Builders therefore focused on larger homes and multifamily apartments – that’s where they saw demand – and profit. That’s how the dearth of new starter homes came home to roost.
As of January, 2016, a third of the 200 largest building markets weren’t even producing new houses within reach of the median buyer.
But time changes all things. Surveys indicate the Millennial generation aspires to homeownership just as much, if not more than, every generation before them.
The main reason? They aren’t getting any younger. The median age of the Millennial recently hit 30. Many now say they are even willing to abandon their downtown enclaves and seek out homes in the suburbs.
Trouble is, in the interim, demand – and prices – swelled. The median list price in February jumped to $230,000, an 8 percent increase from just last year – more in hotter markets.
Builders are responding, albeit a little late. They’re running into challenges finding enough skilled labor, but fulfilling lower-end demand is essential.
Any kink in the natural flow of buyers from one tier of homes to the other affects all the other tiers. It’s the real estate circle of life.
For buyers or sellers, spring’s saturated market means it’s crucial to know true market value.
The local real estate agent is your best resource to get this spring thing fully out of its shell.