The residential real estate market has been suffering extensively from a housing shortage that has driven prices up dramatically. According to the National Association of Realtors, the amount of homes available for purchase is only half of what it was in 2019. This housing shortage has especially affected lower income households, which have had a harder time than ever finding affordable homes. As a result, there is a substantial amount of demand for housing that has not been met.
Low Inventory Available For Purchase
According to the National Association of Realtors, the number of available homes for purchase is down by around half of what it was just four years ago. This dramatically low level of available inventory is the result of a limited number of new homes being built, combined with many current homeowners refusing to place their existing homes on the market. Although home builders have promised that more housing is on the way, it could take months before that begins to alleviate pressure on the market.
Available Housing Skews Towards Higher Prices
This housing shortage is further aggravated by the fact that much of the available housing tends towards the higher side. In an ideal market, a family making $100,000 a year should be able to afford 64% of the homes on the market, but right now, only 39% of available homes fall below that threshold (which is about $341,000). This has been further affected by some homebuilders choosing to prioritize more expensive housing that gives them a better return on their investment, which does little to alleviate the housing shortage at the lower end of the income spectrum.
Demand For Affordable Housing is High
As a result, affordable housing is especially difficult to come by, with the housing shortage helping to drive up prices due to lack of availability. This means that even relatively unappealing properties are likely to see multiple bids, simply because there is such intense competition for what inventory is available. It also means that buyers who cannot afford to outbid their competitors will be left searching for a good home for a long time.
The Impact on the Market
This housing shortage has helped to keep housing prices up, which is better for people who are hoping to retain equity on their property. It is also a good situation for sellers, who can expect to see the value of their property go up during a competitive bidding process. However, it is bad for home buyers, especially first time buyers who will see high mortgage rates eating into their income.
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