The usually strong spring housing market could be far stronger this year, if only there were more homes for sale.
The number of listings continues to drop, as demand outstrips supply and potential sellers bow out, fearing they won't be able to find something else to buy.
The inventory of homes for sale nationally in April was 3.6 percent lower than in April 2015, according to the National Association of Realtors. Redfin, a real estate brokerage, also recently reported a drop in new listings.
The number of listings continues to drop, as demand outstrips supply and potential sellers bow out, fearing they won't be able to find something else to buy.
The inventory of homes for sale nationally in April was 3.6 percent lower than in April 2015, according to the National Association of Realtors. Redfin, a real estate brokerage, also recently reported a drop in new listings.
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The inventory drops are most severe in the lower-priced tier of the market. Homes in the top tier are seeing gains and therefore show more price cuts. Sixteen percent of top-tier homes had a price cut over the past year, compared with 11 percent of bottom-tier homes and 13 percent of middle-tier, according to Zillow*
There are also reports of shortages of construction labor; however, other reports dispute this. In a report by Goldman Saks on labor shortages it is reported that:**
Home construction weakened in March, and homebuilder sentiment hasn't budged in three months — all this in the heart of the historically strong spring housing market. The common complaint from builders is that they are hamstrung by a lack of skilled labor, which is keeping production levels low.
That may have been a factor for the past several years, but today it is less and less a plausible excuse.
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Instead they point to delays in permit issuing and land scarcity. A survey of 100 builders nationwide by John Burns Real Estate Consulting backs that thesis. They asked about costs that didn't exist 10 years ago, and found high levels of builder frustration, not just from labor, but from cost overruns stemming from new regulations for house erosion control, energy codes and fire sprinklers. They also cited understaffed planning and permit offices as well as utility company delays.
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Builders are also seeing a shortage of buildable lots, as demand persists for land closest to urban areas. Those lots come at a premium, which makes it harder for builders to see profit on them. Development of infrastructure for land also slowed dramatically during the recession and is only now starting to ramp up again.
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There is a labor crunch, though, in some parts of the country, more so in the West, as a considerable number of the construction workers who left during the recession still have yet to return.
The average age of a construction worker today is far higher than it was during the housing boom, Michelle Meyer, deputy head of U.S. economics at Bank of America Merrill Lynch Global Research, said Tuesday on CNBC's "Squawk Box." Builders need to attract younger workers, but they seem, so far at least, unwilling or unable to pay them more.
Note added June 2,2016: Flipping homes are heating up also.***
* http://www.cnbc.com/2016/05/24/low-supply-plagues-spring-housing-heres-where-it-is-worst.html
** http://www.cnbc.com/2016/04/19/homebuilder-blues-dont-blame-labor-shortage.html
*** http://www.cnbc.com/2016/06/02/house-flipping-heats-up-creating-home-price-pressure-cooker.html
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