Housing rebound hits supply crunch
By The Associated Press
Published: Thursday, May 2, 2013, 12:01 a.m.
GRAND RAPIDS, Mich. — Beth Heinen Bell and her husband, Christian, are sick of renting.
They want more space. They'd like to host friends for dinner. And now, having seen the real estate market start to rebound, they want to turn housing payments into long-term equity.
So after a decade as someone else's tenant, the Bells, like a rising number of Americans, are finally ready to buy a home. Yet they're running into an obstacle that's keeping the national housing recovery in check: There aren't enough homes for sale.
The housing shortage around Grand Rapids, Mich., a city known for its furniture industry and sleek downtown hospital complex, is fairly typical of what the country as a whole is facing this spring.
Some markets along the East and West coasts have grown red-hot. A handful of other cities remain depressed nearly four years after the Great Recession ended. But many more places are like Grand Rapids — a metro area of roughly 1 million that is strengthening slowly but steadily.
Like so many others, this Midwestern city 150 miles west of Detroit never experienced either the buyer frenzy or the price collapse that marked the boom and bust. Yet it, too, was affected. Prices fell. Homeowners lost equity. And now, many remain unable or unwilling to sell.
The shortage of homes is occurring just as ordinary Americans want to buy again. More of them feel confident about their job and retirement account. Mortgage rates are near historic lows. And prices are rising again, easing fears that new buyers might lose their investment in a home.
“The last four years have been rough,” says Christian Bell, a 31-year-old Presbyterian minister. “But housing prices are starting to come back up.”
A tight supply isn't the only factor slowing what is otherwise shaping up as the strongest spring buying season since the housing boom ended nearly seven years ago. Some Americans have grown to prefer renting. Others who would like to buy lack strong enough credit or a large enough down payment to meet the stricter standards banks now impose.
Part of the reason for the supply problem is that when the housing market collapsed in 2006, many people lost so much equity in their home that they were unable or unwilling to sell. Prices have started to rise, but not enough to restore what many lost. Some still owe more on their mortgage than their home is worth.
Even many who have enough equity to sell want to wait for further price increases.
“Every buyer wants to buy at the bottom, but no seller wants to sell at the bottom,” says Stan Humphries, chief economist at real estate information site Zillow. “They've got this hypothetical price that they think the house is worth at the peak, and they don't want to sell below that.”
Others don't want to leave. During the depths of the recession, they chose to renovate their house instead of finding a new one. After paying for renovations, they now feel more invested and comfortable in their home.
That leaves many first-time buyers like the Bells — a group that makes up about one-third of buyers — competing for a small number of homes.
Just a few years ago, the housing market was facing an oversupply of homes, one that eventually led prices to collapse. The bubble — and the bust — were worst in areas like Arizona, South Florida, Southern California and Las Vegas where developments kept popping up on vast tracts surrounding cities.
Banks offered absurdly low teaser rates to new homeowners who often bought with no money down. When their loan rates climbed after the introductory period, many were left unable to pay. Banks foreclosed, home values fell, and those homes ended up being sold for a fraction of their cost.
In the past two years, hedge funds, banks and other investors entered those markets and helped soak up the supply and lift prices. Now, the country is facing a shortage of homes for sale.
In a few especially hot areas, such as around San Francisco and Seattle, some of the same kinds of bidding wars that inflated the housing bubble are back. Crowds of buyers are creating traffic jams outside open houses.
“People have been wanting to move for a very long time,” says Glenn Kelman, CEO of online real estate broker Redfin. “Somebody rang a bell and said the boom is back, and nobody wants to be late to the party.”
Nationally, there were just 1.93 million homes on the market in March, down 16.8 percent from the prior year, according to the National Association of Realtors. In a healthy market, there's roughly a six-month supply. This March, that number had fallen to 4.7 months — a situation stacked against buyers.
As more would-be buyers bid on fewer properties, prices are being forced up at a rate that might be overstating the market's health. Prices in the top 20 cities have risen 9.3 percent in the past year, according to the S&P/Case-Shiller home price index.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Municipal bonds do another about-face
- Regular or Roth? Pick either
- Winter’s high electric bills stun consumers
- S&P downgrades Highmark; cites UPMC contract fight
- CVS suit could be test case
- Harsh winter sets back Western Pa. maple harvest
- Minorities crucial to filling Marcellus shale gas drilling jobs
- Real estate goes techno