Real estate agents in most markets across the country are working in a seller’s market as dwindling supply of available homes is driving up prices in many regions, from the East Coast to the West Coast.
According to the National Association of Realtors, housing prices are on the rise in many markets and the median price for all homes in May, including new and existing properties, was $252,800. That is an increase 5.8 percent from the same period in 2016, with home prices rising for 63 consecutive months.
The shrinking housing stock is forcing some potential buyers from the market and now is fueling rising rents as many clients are forced to remain tenants.
According to a report being released earlier this month by Harvard University’s Joint Center for Housing Studies, rising home prices and rents now is putting a strain on Americans’ budgets, with about one-third of households spending more than 30 percent of their gross income on housing as of 2015.
Another result is a flattening of homeownership rates as renters are faced with increasing financial hurdles to becoming buyers.
The beneficiaries of this continue to be current homeowners, who have seen their home values soar to pre-bust levels. There has been little improvement in supply or even affordable rental properties.
Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies, told the Washington Post that a primary reason is because construction has yet to regain the pace of homebuilding that predated the bust.
“As the economy continues to recover, as income picks up as household formations pick up, it’s not spurring a supply response,” he told the paper. “It’s a worsening of the situation that was evident last year.”
The report touches on housing affordability, home supply and prices, a widening cost gap, rental prices and supply, and homeownership rates.
According to experts, it is unlikely we will see a new housing bubble because mortgages are harder to get and larger down payments are required. Buyers who have acquired their properties within the past few years also may be reluctant to sell now that the Federal Reserve has started raising interest rates.
The lack of supply is evidenced in the fact that the typical new home for sale was on the market for just 3.3 months in 2015, according to the report — well below the average of 5.1 months dating to the 1980s.
All told, 1.65 million homes were on the market last year, the fewest in 16 years, according to the study.
There isn’t enough new housing being built to make up for the shortfall. Housing starts have fallen for three straight months.
This data leaves real estate agents in a quandary when it comes to finding properties for clients. However, knowing the trends is the first step to staying ahead of them.