It’s hard to buy what’s not for sale, according to First American chief economist Mark Fleming.
Low mortgage rates, high demand and low supply have created a tight housing market that is keeping some potential homebuyers from finding their future home.
“There’s probably lots of young millennials who wish they could buy or would buy if only they could find the homes for sale,” said Fleming.
Mortgage rates are now below 3.5%, the lowest rates seen in several decades. That increases home buying power and drives up demand for houses to purchase.
Meanwhile, millennials are aging into homeownership: millennials born in 1990 turn 30 this year, bringing the largest number of millennials ever entering homeownership to the market, according to Fleming.
“Among millennials, the rate of the desire for homeownership is higher than any other prior generation. I think the challenge is whether they do it at the same age as you or I did it,” said Fleming, citing home affordability issues and student debt burdens for the delay in homeownership.
Record low inventory
But heightened demand is stunted by a market with few houses for sale: low mortgage rates mean that many existing homeowners have refinanced and are less incentivized to move and sell, driving down supply. Currently, inventory is the lowest it has been in 30 years, he said.
“[Low rates are] making that owner of an existing home, who is the largest supplier of housing, to sort of say, ‘Well I have my low mortgage rate. I have my 3.5%, 30-year fixed-rate mortgage. I’m just going to stay put’,” said Fleming.
Inventory is limited especially in coastal markets, East and West, he said. Areas where you find more supply are in the Southeast region, states like Texas, Louisiana, Florida and Georgia. That’s where most of the homebuilding and inventory is today
“So it’s a very tight market and you get rising prices and of course that dynamic plays out… very differently depending on the market that you’re in, driven by those demand and supply dynamics,” Fleming said.
Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter
More from Sarah: