Savvy Investors And Home Price Appreciation Factor Into Nationwide Shortage

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People who own homes are faring well financially and aren’t motivated to sell

March 24, 2017

Photo: Freekee/Wikimedia Commons

A lack of new home construction isn’t the only thing that’s keeping inventory levels low. Many existing homes are being kept off the market.

CNBC reports that during the housing crisis, investors purchased four million distressed properties, primarily starter homes. Even though many of these homes have exceeded their previous values, the investors have yet to cash out.

Also, home price appreciation is influencing homeowners to renovate rather than relocate. Home improvement spending has risen over the past year and is expected to continue to grow.

According to CNBC, the supply of homes for sale is at the lowest level in 18 years, when the National Association of Realtors began keeping track of inventory.

Housing starts are still only about 75 percent of their historical average, and what the builders are putting up is in the pricier, move-up category. The biggest problem is starter homes — the severe lack of them. Builders say their costs for land, labor and materials are too high right now, and starter homes squeeze their margins.

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