A Lack Of Supply Drives Up Housing Prices

Dated: 08/10/2015

Views: 489

by Ben Markus - Marketplace.org

Monday, August 10, 2015 - 05:00

Home prices in the U.S. have risen consistently for the last three years. By that measure, the housing market looks pretty good, but the prices are being driven by a severe lack of supply. And that’s discouraging for many buyers especially in some of the hottest, markets like Denver.

Take the case of new mom Robin Smith. Her apartment in Denver was too small for her growing family. So Smith and her husband went looking for a house. They found one in the suburbs they really liked, a four-bedroom place listed for $259,000.

“We made an offer $10,000 over the asking price,” says Smith as she bounces her baby on her lap. “There were 32 offers on the home over a weekend.”

In the end, her $10,000 over asking wasn’t even close. It sold for $282,000.

Smith and her husband both work for national companies, which makes relocating easier. So they considered something a little radical: they decided to expand their housing search to Texas.

“Someone recommended Austin,” recalls Smith. “And said it was a little more affordable and still a great place to live. So we actually booked a flight the following week and bought a house.”

The median price for a single family home in Austin is about $50,000 cheaper than in Denver. But many people don’t have the luxury of moving to a more affordable area.

The problem from Seattle to Dallas to Denver is buyers are bidding up a very limited supply of homes.

“Prices are rising just too fast,” says Lawrence Yun is chief economist with the National Association of Realtors. “And certainly far ahead of people’s income.”

The supply shortage is a problem for all types of housing for sale. Condos account for just 5.5 percent of all multifamily building in the first quarter of 2015 — That’s the lowest level since the Commerce Department began keeping track of that 41 years ago.

Meanwhile, single family home construction is half of what it should be, according to Bob Denk with the National Association of Home Builders. Denk says changing that would require a seismic shift in the industry. That’s because skilled labor and lots to build on are in short supply.

“And we are having these supply chain headwinds,” says Denk. “It’s hard to just double overnight. But the other part of that is: We have produced at this level before, so it’s not impossible.”

Not impossible, but probably not changing anytime soon. Which means home prices will likely keep going up.

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Ranae Urso

My name is RaNae Urso and I specialize in residential sales and buyer representation in the Denver Metro area. I have been in the real estate business over 14 years of my 30 years in Colorado. I enjo....

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