The Listing ShortageWe have had a decent recovery for the real estate market over the past decade. The recovery has been slow, but steady. While slow and steady may be frustrating for some, it is actually a good thing when you compare it to the real estate boom of 2001 to 2005, which created a housing “bubble” because of rapidly escalating housing prices. A steady increase is more sustainable in the long run.
However, there is no doubt that the market recovery is being held back by a listing shortage, especially in the lower price ranges. The Millennials are coming of age and are ready to buy. However, the Baby Boomers are working longer than ever and are not quite ready to give up their homes. If a Baby Boomer has not paid off their home as of yet, they are likely to have exceptionally low interest rates through refinancing and thus living in their home is typically cheaper than renting. The question is–how will this “stalemate” be broken?
The answer is — gradually. Builders continue to slowly increase their production and this new inventory is sorely needed in most areas of the country. Again, a slow increase is more orderly than a building boom, even though we are not building enough to satisfy present demand. And the Baby Boomers will gradually retire and have to leave their properties as they age. Some of these homes will be handed down to heirs and others will hit the markets. In the long run, the listing shortage will be resolved. In the short run, purchasing a home in the lower-to-moderate price ranges is a very competitive game for those entering the market for the first time.
New buyers are gradually increasing their stake in the housing market. First-timers comprised 32 percent of existing-home sales in March, up from 30 percent a year ago and 29 percent in 2014. The looming threat of interest rate increases may be prompting more buyers to enter the market this year. But also, sustained job and income growth is playing a role, according to last month’s Realtors® Confidence Index. The aging of the millennial generation may also be modestly increasing buying behavior; the report notes that first-time buyers are most likely to be between the ages of 25 and 34. “Realtors® in most markets are saying interest from first-timers is up this year, but competition is stiff for listings in their price range,” says William E. Brown, president of the National Association of Realtors®. The good news is those who do find a home in their price range aren’t having to bring their life savings to the closing table. Sixty-three percent of first-time buyers put down anywhere from zero to 6 percent to secure a mortgage. That said, the report notes that the impact of these measures in attracting first-timers is modest due to a general lack of knowledge about the opportunities available. Only 13 percent of those aged 34 years or younger believe they can purchase a home with a down payment of 5 percent or less, according to NAR’s 2016 Third Quarter Housing Opportunities and Market Experience (HOME) Survey. Source: NARResidential construction accounted for more than 15% of GDP growth in the fourth quarter of 2016, according to data from the U.S. Commerce Department. The National Association of Home Builders (NAHB) noted that by building 100 single-family units in a metro area, 297 full-time jobs are created and $28 million in wage and business income is generated, as well as $11.1 million in federal, state and local taxes. “Home building is a key driver of the American economy,” said Granger MacDonald, NAHB chairman. “Housing creates new income and jobs, purchases of goods and services and revenue for local governments.” “Our builders remain optimistic about the market for newly-built single-family homes and consumer confidence is strong, which should set the stage for a strong spring home buying season,” MacDonald said. “Americans continue to place a high priority on homeownership and work hard to achieve this goal for their families.” Source: NAMB
Baby boomers say first impressions count when they enter a new community. They are closely sizing up neighborhood amenities like the pool, clubhouse area, and walking trails. They’re also looking at the location of the community, judging how near it is to shopping, dining, medical services, and entertainment. Hanley Wood and home builder Taylor Morrison identified what the 55-plus age group of home buyers are searching for in a home through surveys and focus groups. At 77 million strong, baby boomers are expected to continue to have a major impact on the housing market for years to come, and builders are closely paying attention to what they want in their home. Baby boomers say that space is very important to them in their home-buying decision, and they seek a home with openness and flow. What’s more, 81 percent say they find more space in a less populated community more appealing than having less space in a more populated community. Baby boomers also are looking for large common spaces with open floor plans, high ceilings, and natural light, the surveys showed. Integrated indoor and outdoor space also was important as well as sheltered areas, native plants, sustainable and energy efficient technology and materials, and sufficient storage space. Source: BUILDER