The affordability problems that began on the coast have spread to the rest of the country, according to Bloomberg. Prices have risen faster than incomes, and many potential buyers have felt pushed out of the market.
Las Vegas, for example, has seen a decline in sales as low-end affordability disappears. Most single family starter homes, Bloomberg notes, have been purchased by investors and turned into rentals, leaving the entry-level home inventory dry.
According to the latest CoreLogic Case-Shiller U.S. National HPI (HPI), Las Vegas led the nation with a 6.4% year-over-year price increase, and was followed by Phoenix’s 5.7% increase. CoreLogic states that seven of the 20 cities in the composite reported higher price increases in the year ending May 2019 than the year ending April 2019.
“Our inventory is clogged up, causing a backup of people that want to buy,” said Thomas Blanchard, President Elect of the Greater Las Vegas Association of Realtors.. “It’s a self-fulfilling prophecy, nobody is willing to move anywhere because they’re afraid they won’t find a house to buy.”
“All signs point to a housing market that should be doing really well and it’s not,” said Danielle Hale, Chief Economist for Realtor.com on Bloomberg. “The No. 1 constraint, despite low mortgage rates, is that people can’t find housing that they feel is affordable.”
Bloomberg notes that in recent months, price growth has been diverging between high and low priced homes. Prices in the bottom third jumped about 9% in June from a year earlier, compared with 1.1% growth for the top third, data from Redfin show. Meanwhile, sales for lower-priced homes plunged almost 20% as buyers struggled to find properties in their range, according to Zillow.
First-time homebuyers are feeling particularly left out, as affordable starter homes are increasingly disappearing. Demand has been hit by a pullback in foreign buyers, new federal limits on property-tax deductions, as well as recession fears. This has led many renters have felt cautious about buying.
“People do at this point in the cycle start getting a little panicked that they need to get into the market,” said Jenny Schuetz, a fellow in the Metropolitan Policy Program at the Brookings Institution. “And, with lower mortgage rates, a lot of people who were on the fence between renting and owning, may look at owning.”