There is now a significant housing scarcity in the United States, making it more difficult for Americans to purchase houses. Things aren't getting better anytime soon. The number of permits issued for new single-family homes hit its lowest level in five months in April, reports the Census Bureau. The median sales price of a property rose to $424,405 in the spring due in large part to increased demand from first-time buyers. This was a 15.5% year-over-year increase from the previous spring. The total number of single-family homes which have been approved for construction but again not started has increased by 8.5% since this time last year, according to Census data, and "builders continue to face a backlog of uncompleted homes that they must clear before they can begin construction on new projects," Odeta Kushi, First American's deputy commander economist, told Insider.
Housing Shortage: Six Reasons Why There Are Not Enough Homes For Sale
Boomers Won't Move
According to the 2020 projection by Realtor.com, there is not much motivation for boomers to sell their houses, partly because of economic uncertainties. For millennials to enter the housing market and for Gen Xers to upgrade their houses, baby boomers must put them on the market. On the contrary, residents of all ages remain in their homes. National Association of Realtors Vice President for Demographics and Behavioral Insights Jessica Lautz reported that the median seller in 2019 had held the house for ten years, up from the previous average of 6 to 7 years.
Landlords Are Refusing To Sell
Dennis Cisterna, a principal investment officer of Lafayette Communities, an investment company in rental houses, claimed in 2017 that millions of single-family homes were turned into rentals during the foreclosure crisis. They (the investors) "have no motivation to sell," he argues. It's not just your next-door neighbor and other potential buyers for a home anymore; investors are now in the mix. The percentage of households who are renters rose to 35% in the third quarter of 2019 from 31% in 2005, as reported by the Census Bureau.
Owners Are Hooked On Cheap Mortgage Rates
The average rate of interest and outstanding mortgages was 3.9% for the last three years, as the Department of Commerce reported. People are reluctant to give up their current cheap mortgage rates.
To that end, Frank Nothaft, chief economist for CoreLogic, said in late 2017 in front of an Urban Institute housing finance conference held that when mortgage rates increase, homeowners prefer to stay in their houses for a bit longer. If lending rates continue to rise, "it implies the inventory of houses for sale, which is currently extremely low, is likely to stay that way," Nothaft added.
Regulations Raise Costs
Builders claim that each new house costs tens of thousands of dollars more due to laws about environmental safeguards, infrastructure fees, and rules dictating minimum lot sizes. Michael Neal, associate vice president for forecasting and analysis at the National Association of House Builders, estimates that regulations add around $25,000 to the price of a typical home.
Builders Neglect Entry-Level Buyers
According to the Census Bureau, there were around 585,000 sales of newly built houses in the first ten months of 2019. Half of the residences (56%) have asking prices of $300,000 or more. According to Cisterna, "the great majority of the new houses we are creating are move-up items." They're no longer affordable for first-time buyers, as the saying goes. The builders' counterargument is that the national average price of a buildable lot is $49,500, and it's almost three times something in New England. They claim qualified construction labor is scarce because many individuals left the industry during the Great Recession, their children aren't interested in taking over, and many candidates fail drug tests.
The Owners Wish To Limit Supplies As Much As Possible
There is no mysterious force behind the creation of municipal land-use and zoning ordinances. Representatives chosen by the voters legislate them. Officials in charge of development and zoning raise housing prices by restricting the number of residences constructed in a given area or requiring a specific minimum floor area in each dwelling. They're reacting to feedback from locals. 'There are restrictions that are more about the neighbors' sensitivities than the safety of the individuals living in the dwellings,' says Miriam Axel-Lute, associate director for the National Housing Institute.
Conclusion
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