We’re well into the spring housing market and still seeing limited inventory – why? Is this trend unique to the Greater Boston area, or is it a problem nationwide? It’s certainly documented in Massachusetts, and a New York Times article indicates that it’s happening throughout the country. In the entire state of Massachusetts, the number of listings in the first quarter of 2021 was roughly half of the number of listings in the first quarter of last year. Economists have seen trends that hinted at this for years and the pandemic accelerated the state of the market. Here are a handful of reasons that help explain the current conditions.
Pandemic Reasons
Understandably, homeowners feel a reluctance to list their homes for sale during a pandemic. Many people feel uneasy about having strangers walking through their homes.
COVID-19 sparked a rise in the desire to leave rental units in large metropolitan areas and purchase single-family homes in the suburbs and rural areas.
Baby boomers (between the ages of 57 and 75) and older adults represent the majority of homeowners. Due to the rapid spread of COVID-19 in assisted living facilities and nursing homes, they’re now less inclined to transition into one of those options. Many are staying in their current homes or purchasing larger multi-generational homes, making it hard for the generation behind them to upgrade.
Pandemic relief programs infused funds into the housing market that may not have otherwise existed. Government-backed loans in mortgage forbearance during the pandemic prevented foreclosure or a forced sale, which conversely kept many of those homes from coming on the market.
Economic Reasons
Housing demand is extremely high, increasing at 20-25% annually. Young adults aged 30-35 are the fastest-growing segment of the population, and also the primary first-time homebuyers.
After the housing bubble burst in 2007, residential construction declined to 40% below the demand for the decade that followed, and has continued to be slower than the market needs. Of note, this industry will be an important contributor to economic growth.
Low mortgage rates are typically considered beneficial to home buyers. But for would-be sellers, they have encouraged a lot of homeowners to keep their starter homes as investment rental properties rather than putting them on the market.
The housing market ebbs and flows. A change in any one of these variables could cause a shift that would lead to more inventory. If you’re considering selling and would like a complimentary market analysis, give us a call!
