Homebuyers Face Fierce Competition in Today’s Marketplace
Packed open houses. Bidding wars. Rising prices. If you are a California homebuyer in the market today, you are up against some hefty competition for available homes.
California is home to some of the highest priced housing markets, both in terms of renting or buying a home. Housing is becoming increasingly unaffordable in many cities, with San Francisco, San Jose, and Los Angeles listed among the highest rental markets in the nation, according to a study by ApartmentList.com. Rising rental rates in California have inspired many residents to consider buying a home as opposed to burning 30% or more of their paycheck on rent. However, would-be homebuyers are facing fierce competition in the marketplace today.
This spring, homebuyers may struggle to find a house. Listings are growing as they normally do this time of year, according to chief economist, Jonathan Smoke, of Realtor.com, but because demand has been growing faster than supply, homes are selling faster, and prices are going up. An index by Redfin that measures requests for property visits rose in the first two months of the year to the highest level since the brokerage began tracking such data in 2012.
The share of first-time homebuyers dropped to 30% in February, down from 32% in January. Chief economist, Doug Duncan, of Fannie Mae suggests that prices will rise while limited inventory will put a cap on transactions. The shortage is more acute for starter homes. While first-time homebuyers aren’t necessarily millennials, people age 35 or younger have become housing’s largest segment. This demographic is facing weaker affordability as home prices climb faster than incomes. Starter-home buyers on average now need to devote 38% of their income to housing costs, up from 32% four years ago according to Ralph McLaughlin, chief economist of Trulia.
The main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.