A shrinking supply of starter homes does not necessarily mean rising home values around the country.
The housing shortage has become common knowledge around the country by now. There are too many buyers, and not enough homes to go around. The result? Skyrocketing prices. Starter homes have been particularly hard hit but, believe it or not, the shrinking supply doesn’t necessarily lead to rising home values.
As Trulia reports, another large aspect of home price fluctuations is the number of people actively bidding on homes. If fewer people are bidding, even with a shrinking inventory, prices may not rise, and could even drop.
Take Columbia, S.C. and Charleston, S.C. for example. Starter home inventory in both of these cities has fallen by about 20 percent of the past year, but instead of heading into the atmosphere, starter home prices have actually dropped by 0.8 percent and 5 percent respectively.
These two cities aren’t an exception to the rule, either, as 18 large metros have experienced a drop in inventory but have also seen prices drop. New York and Kansas City are just two other example.
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