Panic in the Housing Market: Is Home Buying Possible?


It is becoming clear that the availability of new and existing homes is limited. 26% of surveyed home buyers were concerned about affordability and 15% are worried about low inventory of homes. High demand and low supply means higher prices.

In April 2016, the average price was $379,800, with the median being $321,100. In 2002, 30% of homes were sold at $150,000 and under. In contrast, only 2% of homes were sold at that price in April of last year.  This drastic spike could be explained by the fact that lenders are more skeptical of lower income groups with subpar credit. As a result, these lower income groups are shoved out of the housing market.

So uneasy lenders have “closed the credit box” to prevent new borrowers from entering the market. Archana Pradhan, an economist from CoreLogic (a market research firm), writes: “Self-sidelining of cautious/discouraged consumers makes it appear as if credit is tightening.”

Which generations are most affected?

According to Home Buyer and Seller Generational Trends, for the last three years, 35% of home buyers have consisted of millennials (born between 1982 and 1994). Millennials have been turning to the suburbs, purchasing single detached family homes.

People of Gen X (born between 1964 and 1981) make up 26% of home buyers, and stay fairly consistent with their purchasing habits. Gen X is known to be ethnically diverse, and earn the most income in comparison to other generations. This age group tends to prefer large homes with spacious rooms, easy commutes and quality nearby schools.

The Silent Generation (born between 1923 and 1933) wants smaller, less expensive homes that aren’t too far away from their family and friends. Although the Silent Generation wants to sell, they often can’t because their home prices tend to be worth less than their mortgage balance. In fact, 19% of people in this age group couldn’t sell their homes even though they planned on doing so.

What can we expect for the future?

Because lenders face problems with allowing apartment loans, builders have stepped up to the plate. Many builders are taking on single-family construction projects, which should ease some tension in the housing market. The focus on single-family home constructions will offset the 12% drop of multi-family starter homes from a year ago. Since March, single-family home constructions has risen 3.3%. Considering the current state of the market, this shift in the production of housing will be a welcome change in 2016.

There’s no need to panic.

Even though the housing market seems a little bleak, don’t worry! Things seem to be picking up with the construction of single-family homes, which should ease the pressure on millennials who are trying to find a new place to live. This, in turn, will free up smaller living for the Silent Generation and even out the housing market. This great balancing act will take time, but it seems like the housing market will soon find an equilibrium.

Are you in the market to buy a home? How has your experience been like? Let us know by commenting below.

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