Call it the summer of shortage. In many local housing markets in the U.S., there won’t be enough homes for sale this summer to satisfy demand. First-time home buyers, in particular, could be “boxed out” of the real estate market due to a dearth of inventory in many areas.
Are First-Time Home Buyers Getting “Boxed Out”?
First-time buyers often purchase existing / resale properties, as opposed to brand-new homes. This means the current homeowner must relocate in order to free up the property. But in many housing markets across the nation, this is not happening at a sufficient pace to satisfy buyer demand.
Why aren’t homeowners moving? Some may be waiting for their home prices and equity levels to rebound, following the crash that occurred a few years ago. Others may be concerned about finding another home that meets their needs. The bottom line is a lot of would-be sellers are sitting tight for now.
Sales of existing houses have risen for the last seven months in a row. But according to one analyst, it’s still not enough. David Crowe, chief economist at the National Association of Home Builders, told CNNMoney: “Without additional inventory on the existing side, the first-time homebuyer is boxed out.”
Inventory Has Shrunk in Most Real Estate Markets
About once a month, Realtor.com publishes a monthly housing market summary with data for the 200 largest cities across the country. Among other things, the company tracks the total number of homes listed for sale in each market. And since Realtor.com is one of the largest property listing websites in the U.S., this metric is a good indicator of overall inventory trends.
Nationally, there are fewer homes for sale today than the same time last year. The vast majority of those 200 or so real estate markets have experienced inventory declines over the last year or so. Only around one-eighth of the metro areas saw an increase in total number of listings, and in most cases those increases were marginal.
“Shrinkage” has been the norm over the last 12 months, where real estate inventory is concerned.
A couple of years ago, the largest inventory declines were occurring in California. Today they are more widespread across the country.
Here are the ten real estate markets where home listings fell most in the last year:
- Oxnard-Thousand Oaks-Ventura, CA (-38.4%)
- Ogden-Clearfield, UT (-37.0%)
- Tulsa, OK (-35.1%)
- Dallas-Fort Worth-Arlington, TX (-34.7%)
- Clarksville, TN-KY (-33.4%)
- Chico, CA (-33.3%)
- Port St. Lucie, FL (-33.1%)
- Salinas, CA (-32.5%)
- Bremerton-Silverdale, WA (-32.3%)
- Omaha-Council Bluffs, NE-IA (-32.2%)
There were dozens of additional markets with significant levels of inventory reduction (fewer homes for sale) over the last year. In contrast, there were only a handful of metro areas with significant gains in inventory.
How to Compete in a Hot Market
Based on these and other metrics, first-time buyers in some markets could have a hard time finding homes to purchase this summer. Buyers will have to be flexible when it comes to their housing “wish lists” and budgets. In competitive real estate markets with limited inventory, first-time buyers often have to scratch items off their “want” lists.
If you’re in one of the many real estate markets where demand is outpacing supply, you need to bring your ‘A’ game. This means having your financing lined up before you start house hunting. First-time buyers should also be realistic about what they can get for the money, and which features they can live without. In a tight real estate market, you rarely get everything you want in a home. Compromise is the name of the game.
It’s also important to make a strong offer based on recent sales data. First-time home buyers often have a “low-ball” mindset when it comes to their offers. That might work in a buyer’s market, but such markets are few and far between right now. In a seller’s market, where there aren’t enough homes for sale to satisfy demand, buyers need to make strong offers based on real data. Low-balling the homeowner in a hot market is rarely a good idea. There will be other buyers in line behind you.