Photo: Robert Clark
The nationwide inventory crisis could be the primary driver of the housing market next year.
Historically low levels of inventory could not only continue to drive prices up but prove to be an insurmountable obstacle for many first-time Millennial homebuyers, according to a market forecast released today by the listing site Zillow.
Nationally, there are 12 percent fewer homes to choose from now than there were a year ago. And of the homes that are available, more than half were in the top-third of home values, pricing them out of reach for the typical first-time Millennial homebuyer.
But it’s not just first-time buyers feeling the impact of the inventory crunch. Many homeowners are now staying in their homes, afraid that they won’t be able to find a suitable home in their price range.
And while home prices are expected to climb about 4 percent next year, price appreciation will slow from this year’s annual rate of nearly 7 percent. However, next year’s growth will still be above the “normal” rate of about 3 percent annual appreciation.
“In most markets around the country, housing has become a game of musical chairs, and nobody wants to be the last one without a seat. Homeowners who are looking for a change will turn to remodeling and redecorating instead of selling their home and facing the challenges of being a buyer in a seller’s market,” says Zillow Chief Economist Dr. Svenja Gudell in the release.
Building more homes may be the most effective way of curtailing an inventory crisis, but building levels have remained well below historic norms for the past several years. Additionally, land prices and regulations have made it virtually impossible for builders to develop affordable housing in the most popular urban areas.
Over the next year, builders will refocus on constructing more entry-level homes as they will not be able to ignore this segment of the market any longer.
The entry-level home building boom will also help pave the way to the evolution of the suburbs. These new homes will be farther out from city cores, driving up commute times.
“Builders are also facing high costs, so instead of adding density in cities where zoning laws and land costs often preclude affordable building, we’ll see the suburbs grow and expand outward,” says Gudell.
These new homes will be constructed to appeal to Millennial and Baby Boomer generations.
“Wide hallways can make it easier to move in, as well as make it easier to navigate a stroller or wheelchair through the halls. Large drawers will replace cabinets, making it easier to access everyday items that previously were hard to reach,” predicts Gudell in the report.
Click here to read the entire report.