With home values rising, inventory shrinking, and a buying population spurred on by rising interest rates, more and more housing markets are skyrocketing in value. Zillow recently warned that home shoppers have nearly 9 percent fewer homes to choose from than they did this time last year and, furthermore, that many of the homes available for purchase are “high-end,” making them completely inaccessible to the bulk of the buying population. The National Association of Realtors (NAR) reported Millennials are purchasing more than one in every three homes at this time, and most of them are first-time buyers.
“This year’s home-shopping season is shaping up to be even crazier than the last, and sadly, the group that will have the hardest time is first-time and lower-income homebuyers,” observed Zillow chief economist Svenja Gudell. She added, “These buyers will be competing for the few entry-level homes on the market, which are also the ones appreciating the fastest because of extremely high demand.” About a fifth of the available inventory nationwide is considered “entry level” at this time.
Investor Insight: More of the population will likely find themselves compelled to continue renting, so investors with an inventory of attractive, single-family rental options will be able to command solid rents from reliable tenants.
Gudell went on to speculate that a “shift” may be in the works as more new construction works its way into the housing ecosystem, but added, “buyers should not hold their breath.” Rental rates are rising along with housing prices. Median rent rose 2.7 percent nationwide to $1,447 per month, and larger metro areas like Sacramento, California, and Seattle, Washington posted gains roughly double that.
Inventories are shrinking as quickly as prices are rising and, in many areas, faster. San Jose posted a 26 percent drop in inventory over the past 12 months, and Las Vegas lost 23.5 percent. Washington, D.C. lost 27.3 percent, and inventory shrank in a total of 20 of the nation’s 35 largest metro markets.
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