Housing is making its way back into the headlines and most of the news is good. A decade ago, you probably would’ve never heard someone say they’d rather rent then own a home, but rent around the country is at an all-time high — and in some cities it’s now cheaper to buy a home than to rent. People are starting to buy houses again. Mortgage rates are at an all-time low and there’s lots of inventory. Or is there?
Glenn Kelman, president and CEO at the real estate website Redfin, says there’s actually a lack of inventory and that’s helping the housing market bounce back.
“Right now prices are increasing because nobody wants to sell a home, says Kelman. “The banks stopped foreclosing on properties, short sales are even on decline in some places. So the only folks who are selling properties are regular homeowners and they’re able to sell properties for higher prices. Really, the only limit on sales volume has been the number of homes for sale, not the number of buyers out there looking for them.”
But what about the so-called shadow inventory that everyone was so worried about a year ago?
“It’s been the monster under the bed of the American economy for the past five years. Lots of folks have been worried that banks have all sorts of foreclosed homes that they could put on the market and flood the market with properties that haven’t been lived in for years — and destroy home prices. That has been a problem for the past five years, but over the past 12 months, much less so,” says Kelman.
Kelman says the American Dream of buying a home isn’t realistic anymore for about half of the U.S. population. He says today many Americans just don’t have the credit to buy a home, which he calls the “central tragedy of this economy.”
“You’ve got home prices at historic lows, interest rates at historic lows, but lots of people who just don’t qualify because they’ve had a foreclosure in their past or a short sale in their recent past. So as a result, when rents go up and it would be cheaper for them to actually buy a place, they can’t. Landlords at this point understand this, so they’re able to raise prices on folks who have no other choice but to continue renting,” he says.
For Americans who are still looking to become homeowners, Kelman says emotion has come back into the home-buying process.
“For a long time, the only people who were out there buying houses were sharks, investors who were being very calculating about it. Now that you see regular home buyers coming back into the market, it’s an emotional process. As much as you want to make it a cold, hard calculation, some people are just making more emotional decisions,” says Kelman. “The way you see that surface in the economy is that people are investing in homes before selling them.
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