But it looks like the end of this historic housing shortage may by on the horizon. In a recent article on housing trends, the economics team at Realtor.com predicted the second half of 2018 would see a major uptick in inventory thanks to new construction. And according to the same article, if inventory increases as predicted, that could mean the first net inventory gain in over three years.
The U.S. real estate market is currently experiencing the worst inventory deficiency in 20 years, which new data from our realtor.com®Housing Shortage Study suggests can be attributed to two primary reasons – boomers’ reluctance to sell and homes fitting current family needs. The findings come from an online survey of 1,054 randomly selected homeowners across the U.S. conducted on behalf of realtor.com® between July 6 and 13. The respondents were asked a series of questions aimed at examining the root causes of the current national inventory shortage.
Millennials plan to sell next year…
According to the results, approximately 59 percent of respondents are not planning to sell their home in the next year, with nearly 35 percent planning to sell, and nearly 6 percent unsure. Taking a look at age segments of those with plans to sell next year reveals 60 percent of these potential sellers are millennials (See Table 1). They are the most likely age group to be outgrowing their current living space, and are therefore more likely to be selling to move to a larger home (25 percent) or one with nicer features (24 percent).
Table 1: 60 Percent of Potential Sellers are Millennials (18-34)
Millennials with plans to sell could mean good news for buyers, as starter homes remain the most sought after price point in today’s market. In fact, the supply of starter homes in the market is down 17 percent year over year, as compared to medium sized home inventory which is down 10 percent and larger size home supply which is down 5 percent year over year.
The housing shortage forced many first time home buyers to consider smaller homes and condos as a way to literally get their foot in the door. The survey data reveals that we may see more of these homes hitting the market in the next year, but whether these owners actually list will depend on whether they can find another home.
While baby boomers plan stay put
Breaking down those not planning to sell by age points toward one significant contributor to the housing shortage – 85 percent of baby boomers surveyed indicated they are not planning to sell their home in the next year (see Table 2). Homeownership among boomers, at 78 percent, is nearly twice as high as millennials, at 41 percent. As a growing population of boomers decide to stay put so are approximately 33 million properties, many of which are urban condos or suburban single-family homes – the most popular choices for millennials.
Table 2: 85 Percent of Boomers (55+) Don’t Plan to Sell
Boomers indeed hold the key to those homes the market desperately needs, both in the urban condo and the detached suburban home segment. But with a strong economy and rising home prices, there’s really no reason for established homeowners to sell in the short term. Although down-sizing might be on the minds of boomers, they face the same inventory shortages and price increases plaguing millennials.
Older groups having an influence on what younger segment can buy is not new. What is different now is the record size of these two groups, and the extent to which this is impacting the supply of inventory available on the market, and the stubborn demand for it. Historically, the geographic mobility of older age groups has been considerably lower than that of younger age groups; in the past three decades, older generations have moved about four times less their younger counterparts. And while that ratio has somewhat remained stable up over time, the population mix has not. Census data shows the share of the population between the ages of 55 and 74 years old has increased by 30 percent in the last 30 years, from 16 percent in 1985 to 21 percent in 2015.
Overall top reasons for not selling
When those with no plans to sell were asked why they wanted to stay put, approximately 63 percent indicated their current home meets the needs of their family. The other most popular reasons include low interest rates (16 percent), recently purchasing their home (15 percent), needing to make home improvements and low property taxes (each cited by approximately 13 percent of respondents).
Life events drive real estate transactions. When the majority of home owners feel their family needs are being met by their current home, there is nothing compelling them to put their home on the market.
Top reasons for not selling by generation
According to the survey’s findings, the reasons for staying put differs significantly by age. For instance, 72 percent of baby boomers indicated their current home fits the needs of their family. This is followed by low interest rates (16 percent), concerns about financial security (13 percent), and the need to make some home improvements (12 percent).
A majority of millennials, 52 percent, also indicated that their top reason for not selling is their home fits their family needs. This was followed by 27 percent recently purchasing their home and approximately 16 percent citing low interest rates. For gen Y, the top reasons not to sell include: home meeting family needs (65 percent), low interest rates (16 percent), and low property taxes (16 percent).
A key reason for homeowners staying put for a longer period, according to the National Association of Realtors®, is because of inadequate levels of new home construction over the past decade.
The TakeawayIf you’re thinking about selling, now is the time to make a move. When the market cools down and there are more homes available, buyers are going to have more options—and the price you could get for your home in fall 2018 may be significantly lower than what it would fetch today.