In cities with red-hot housing markets such as San Francisco, Seattle, or Portland, tight inventory and fierce bidding wars are to be expected. But these cities and their ever-increasing home prices and cost of living are beginning to have an unforeseen effect on other cities and their housing prices and supplies, as well.
As cities like San Francisco become more and more unaffordable, fewer people are able to move there. Even with a job offer that presents a good salary, these cities are often too expensive and the housing markets too competitive to justify picking up and moving. So what are people doing? They are heading for open waters in cities like Omaha and Minneapolis. As more workers begin to fill cities like these as an alternative to more expensive cities with strong job growth, the housing supply is beginning to feel the strain.
Of the cities with the largest declines in housing inventory over the year ending in February, Grand Rapids, Mich., Indianapolis, Ind., Omaha, Neb., and Minneapolis-St. Paul, Minn. all found themselves in the top 10, Bloomberg reports.
But some midwestern cities that aren’t experiencing the strong job growth of Omaha and Minneapolis are still finding their housing inventory shrinking. This is likely due to the fact that some of these markets are still below bubble-era peaks. Selling a home for less than they were once worth is making many buyers reluctant to list their homes, especially if they owe more on their mortgage than they can get in a sale.
Since median home prices in these Midwestern cities are nowhere near what they are out West, the bidding wars will not lead to purchasing prices that are quite as high, nevertheless, the Midwest’s housing market is beginning to heat up and follow the lead set by many Western markets.