Study: Low Inventory and High Prices Are Housing's New Normal

Anyone hoping for a housing market with greater inventory and lower prices will be disappointed for at least the next two years, according to Summer 2018 edition of The Housing and Mortgage Market Review released today Arch Mortgage Insurance Co.

 

The new report determined that the number of existing homes for sale is at the lowest level since analysts started tracking the data in the early 1980s. Super-limited inventory coupled with below-normal construction has created a supply deficit that cannot meet the demand surplus, especially in an economy where employment and consumer confidence are rising. As a result, the new report predicts that home prices have a 95 percent chance of rising over the next two years, especially in the entry-level housing segment, which could prevent potential first-time buyers from entering the market.
 
“Fewer people are selling starter homes to trade up to bigger houses, and that’s a trend that will continue now that the majority of homeowners have lower mortgage rates than they could get on a new loan,” said Ralph G. DeFranco, global chief economist for Arch Capital Services Inc. “Millions of entry-level homes were converted from owner-occupied to investor-owned rentals during the foreclosure crisis and higher development costs, ranging from utility hook-up fees to building permits, are leading builders to focus on constructing larger, more expensive houses. With fewer new starter homes, the most likely scenario is continued, rapid price growth of existing homes, particularly at the lower end of the market.”