Rising home values are often seen as a good thing as homeowners dream of seeing a strong return on their housing investment. Yet, these higher values may just discourage renters from buying a home:
Renters are avoiding buying a home mainly because house prices are soaring. Just 52 percent of renters surveyed in a National Association of Realtors quarterly report said they feel now is a good time to buy — that is down from 62 percent of those surveyed one year ago…
More owners, 71 percent, think selling is a good idea today, up dramatically from 61 percent a year ago. There is so little supply on the market that homes are selling at the fastest pace on record. Great, if you’re a seller, but it begs the question: Why are so few homeowners listing their homes?
“They’re either content where they are, holding off until they build more equity, or hesitant seeing as it will be difficult to find an affordable home to buy,” said Yun. “As a result, inventory conditions have worsened and are restricting sales from breaking out, while contributing to price appreciation that remains far above income growth.”
Affordability is the culprit for both current renters and homeowners. Less than half of all respondents said homes are affordable for buyers. Of course, there are regional differences, with more saying homes are affordable in the Midwest and less saying so in the West.
The housing market often swings back and forth between buyers and sellers. Yet, we have several longer-term problems at play here:
(1) New homeowners having difficulty entering the market (coming off a burst housing bubble with fewer financial resources, millennials with other financial commitments, etc.).
(2) Perhaps shifts in how many younger Americans want to buy the same kinds of homes that are available (though some of this may be overblown).
(3) Housing prices for starter homes or entry-level properties that are too high in several high-demand metropolitan areas (Bay Area, New York City, southern California).
(4) Available credit and homes for those with more financial resources but fewer options for those with less.
In other words, the normal swing of the pendulum between buyers and sellers might not be enough to put the housing market back to rights.