In a world of supply and demand, today’s housing market is proving to be a Rubik’s Cube for buyers – a puzzle that is seemingly impossible to solve unless you have the secret answer. With sellers not incentivized to reduce asking prices, buyers are left to sort out the purchasing puzzle.

According to a report by Bloomberg Markets, during the first quarter of 2017, less than four months’ supply of houses have been in the market. At the zenith of the post-recession market, that mark was 12 months’ worth in 2010.

One factor is income growth that is lagging behind property values. The end result is affordability constraints. This is driving growth in rental demand and benefits investors. Median prices for existing homes was 7.7 percent higher in February than the same month in 2016, while income was up just 2 percent during the same period. According to Ralph McLaughlin, chief economist at Trulia, recovering home values are proving to be a double-edged sword.

“While homeowners across the country are thrilled to regain equity in their homes, many have not been in a hurry to trade up. This has added to the inventory gridlock that ties up would-be starter-home inventory from ever coming on to the market, further constraining supply and decreasing affordability.”

New housing could fill the gaps. While starts are gaining steam, they remain off the high-water marks set a decade ago. Starts are at their highest level in a decade and new home sales are at their highest level in eight years, but short of marks set a decade ago. McLaughlin noted that it can have an impact on trends in supply.

“In markets plagued with tight inventory and decreasing affordability, Millennials who make up most of these first-time buyers may find homeownership increasingly out of reach. However, there continues to be an uptick in new construction – which should help increase supply in some inventory-constrained markets.”

There is no problem with demand. According to a University of Michigan survey, 80 percent of respondents in the first quarter thought that now was a good time to buy a house, with 66 percent believing it is a good time to be selling. These levels remain slightly off the high marks set in 2005. Richard Curtin, director of the Michigan survey of consumers, said the data has some interesting lessons.

“The data suggest that increases in the number of available homes for sale will ease but not erase the inventory constraint on the housing market.”

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