Young Buyers Despair As Shortage Of Houses Causes Prices To Rise

Fears of a housing bubble are being stoked by double digit price gains across the nation.

By Jeff Vasishta February 14, 2017

Although the explosive New York market appears to have cooled during the last year, in the rest of the country, real estate’s jet engines are still firmly strapped on, fully fueled and sending prices skywards. The main reason is that there just aren’t enough homes to go round. According to a recent article on Realtor, in the fourth quarter of 2016, the number of homes for sale fell to the lowest level in nearly two decades, creating a coastal bubble that shows no sign of deflating. Great news for home flippers, terrible news for first time buyers.

The average price of a single-family home increased in 89 percent of metropolitan areas in the fourth quarter compared with a year earlier, the National Association of Realtors said. Adding further fuel to talk of a bubble, more than half of the 178 markets included in the report have now reached or surpassed their previous peaks. There were 1.65 million homes available for sale, 6.3 percent less than the same quarter a year earlier.

RelatedBrooklyn Is King Of New York When It Comes To Decade Long Price Increases

Also, 17 percent of metro areas experience a double digit increase from the year before—14 percent alone in the third quarter. Cities caught up in the upward maelstrom included Portland, as well as Orlando, Nashville, Memphis and Cincinnati. But why is there a shortage of houses? Surely real estate is supply and demand. If people want more houses, why can’t developers build them? There are several reasons.

First, after the last housing crash, many people lost the appetite to buy and sell houses. This, in turn, has caused a stagnancy in certain areas. Second, credit has remained tight and high down payment requirements have locked some new buyers out and kept them as renters. Finally, landlords are reluctant to sell and release their rental properties into the market for owner occupants because high rents have been a boon for them.

RelatedWhy Lisbon May Be Europe’s Best Kept Real Estate Secret

Home builders can’t keep up. According to Forbes, “about 1.1 to 1.2 million net new households are formed each year. So that is the number of new homes needed to be built just to accommodate this rise in housing demand.” Added to that number are the 3-400,000 dilapidated properties that go the way of the bulldozer. So, the total number of new homes needed is about 1.5 million per year. From 2007-2016, the annual number built was just over half that number at 870,000.

California is where the biggest gains have been happening. The Silicon Valley/San Jose area continues to gain altitude price wise. The median price of a single family-home there is now over $1 million. San Francisco is a close second. Anaheim and Honolulu were third and fourth.

Nationally, house prices were up 5.7 percent over the same time last year. Unlike the bubble of 2008, this boom seems set to run for a little while longer. At least, until there’s enough new housing to go round.

Jeff Vasishta



Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

    Avocado toasts are the reason why millennials can’t afford a home, says one Australian real estate developer. #AvocadoToast #Millennials
    Five years on since Superstorm Sandy, Queens’ coastal peninsula is in the midst of a development boom. #Development #Rockaways
    It turns out, renters can’t get enough of good ol’ no-doorman-no-frills apartments. Too bad developers aren’t building any. #Doorman #LuxuryRentals
Developers Jump Aboard The Trend To Revamp Transit Hubs And Remake Cities
Never has the often used marketing term, “close to transportation” been more important when attracting home buyers. These days it’s not just homes that are…
Millennials Are Fueling The Current Sizzling Real Estate Market
Ever wondered why the hosts of home improvement shows seem to be getting progressively younger, along with the fresh-faced couples getting their new properties made…
The Best Cities For Recent Grads To Rent – Without Blowing Their Entire Paycheck
What’s next post graduation? For most, the logical answer is to find a job. After the excitement of finishing your studies and the big celebration,…
Luxury Knows No Limit In Malaysia As A Deluge Of New Developments Hit The Market
The amount of newly constructed high-end real estate in Malaysia is almost as abundant as the lush vegetation which covers the tropical landscape. Despite vacant…
Don’t Call It A Commune – Upscale Co-Living Is Attracting Major Development
What may have once been referred to as a commune is today termed a co-living space. The big news that it’s not hippies with hemp…
It’s Official—New York Is Now The Most Expensive City In The World To Build
As if you didn’t already know, it’s expensive to build in New York City. Not just expensive but now officially the most expensive place in…
An Ultimate Destination For The Most Comprehensive Real Estate Data, Agorafy Prepares To Launch Nationwide
In the coming days, Agorafy will be entering a new chapter. It is the beginning of a new growth cycle in real estate technology with…
A New Beach Front Condo Building Slated For the Rockaways Amid A Slew Of New Development
Proving that New Yorkers are the masters of reinvention, particularly when it comes to real estate, a new millennial-friendly condo tower is due to rise…

TOP 10