What's Happening With the Housing Supply?
If you’re currently working with us, you may have heard us talk about the short housing supply in recent months; the home buying demand continues to outweigh the number of homes for sale.
Nationally, the inventory of homes for sale in May is 3.8 percent lower than this time last year, according to data from the National Association of Realtors. Redfin, the leading site for home buyers, has also reported a drop in new listings.
Simple economics teaches us that when supply is low and demand is high, price goes up. Home values across the country were expected to rise by a mere 2 percent growth from this time last year, but Zillow’s latest data shows values soaring more than 4.9 percent increase in value.
But why? Why is the inventory so low? Economics, demographics, tax policy, are all playing a role. Current homeowners are simply staying put longer. Here in California, only 4.8 percent of of single-family homes turnover, as opposed to the 9 percent back in the late 70s. Most homeowners stay in their homes 5-7 years, but now we’re seeing homeowners staying put for an average of 10 years or more. Low rates on current mortgages, low property taxes, and capital gains hits are just a few reasons long-time homeowners are staying put. When they do the calculations and look at what they would be giving up compared to what they would be getting, many decide to stay.
So if the turnover rate is low, and demand is high, what can we expect from new construction? New homes add to the housing stock and provide much needed housing for the many regions that are undersupplied. Many areas in California are struggling to keep pace with local growth — job growth and household growth. California is amongst the most underbuilt areas in the country, with only one permitted new unit of housing for every 1.6 jobs, compared to the U.S. average of almost two permits for every job created.