The economy may be recovering, but the real estate market remains sluggish. Perhaps one after-effect of the recession is more homeowners staying put rather than trading up. In July, pre-existing home sales dropped by 3.2 percent from the previous month, and
were also 1.6 percent lower than they were a year ago.1
Low housing inventory and stricter lending standards have contributed to the problem for homebuyers. As of August, 51 percent of Americans in the market to buy a home were first-time homebuyers, up from 35 percent a year ago.2
Unfortunately, the homes that are going on the market — as well as new ones being built — tend to be in a higher-priced market than the average first-timer can afford. In 2015, the average new home was priced at $351,000, which was 40 percent higher than in 2009.3 Only 35 percent of the new construction market offered houses at less than $249,000, which is the amount respondents said they could or would spend on a new home.4
One reason new builds are going after the higher-end market is because there are not enough construction workers to go around. According to the National Association of Homebuilders, the construction industry has about 200,000 unfilled jobs, so contractors are using the scant workforce they have to build more expensive homes with higher profit margins.5 Builders say they could construct more homes if they had the labor to do it, but many workers were forced to get other jobs during the real estate market decline, and they haven’t returned.6
The lack of workers has driven up wages, which is another reason newly constructed homes cost so much.7 Between the lack of new construction and homeowners deciding to stay put instead of trading up, many first-time homebuyers are shut out of the starter-home market.
This is also a hindrance when you consider that high costs due to inventory shortage permeates the rental market as well. Today’s median price for a new apartment is more than $1,300 a month, which at least half of today’s renters cannot afford.8
1National Association of Realtors. Aug. 24, 2016. “Existing-Home Sales Lose Steam in July.” Accessed Sept. 8, 2016.
2National Association of Realtors. Sept. 8, 2016. “First-Time Buyers Are Slowly Re-Emerging” Accessed Sept. 8, 2016.
3Stockton Williams. Urban Land Magazine. Aug. 22, 2016. “Understanding the Scope of the Housing Shortage in the United States” Accessed Sept. 8, 2016.
5David Randall. Reuters. Sept. 6, 2016. “Construction worker shortage weighs on hot U.S. housing market.” Accessed Aug. 3, 2016.
8tockton Williams. Urban Land Magazine. Aug. 22, 2016. “Understanding the Scope of the Housing Shortage in the United States” Accessed Sept. 8, 2016.
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