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Low Inventory is Concerning Real Estate Professionals

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The low inventory of homes for sale is causing some real estate companies to panic a bit.  The number of homes for sale March 2017 compared to March 2016 fell seven percent according to the National Association of Realtors.  In an article published by CNBC by Dian Olick, she quotes Glenn Kelman, CEO of Seattle-based Redfin, a real estate firm, “”The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out — it’s affecting our business; it’s limiting our sales.”  

The cause of this low inventory issue can be attributed to a few factors.  To begin, many homeowners are deciding to become landlords.  Instead of selling a home when moving on, homeowners are holding on to their home and renting it out.  Another reason is new home construction is declining.  On average, home builders are building about 18 percent fewer homes than the historic average.

The good news for home owners looking to sell, homes are selling quickly and some are even selling above list price.  Homes in April 2016 went under contract in 50 days, as of April 2017, that number decreased to 40 days.

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Expect A Surge of Young, First-Time Home Buyers Into 2020

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Over the past fifteen years, the percentage of first-time home buyers that fell between the ages of 20 and 29 has increased from 17 percent to 28 percent of all buyers, according to TransUnion.  Following the same trend, first-time home buyers between the ages of 20 and 39 increased 16 percent in that same 15 year span; ultimately, the age group made up 60 percent of all first-time home buyers by the end of 2015.

An article published by The M Report by Brian Honea indicated that TransUnion anticipates up to 17 million first-time home buyers will enter the real estate market over the next five years.   With this influx of new homeowners comes positive economic news for both local economies as well as the mortgage lending industry.

FotoFlexer_Photo Joe Mellman, VP and Mortgage Business leader for TransUnion, explained  that first-time home buyers help to
improve the local economic activity as a result of increased construction and home improvement demand.  Mellman also describes, from the perspective of mortgage lenders, “First-time home buyers are valuable prospects in the eyes of many mortgage lenders, as that time in a borrower’s life often corresponds to additional financial needs,”.

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Photo Credit:  Renaude Hatsedakis

 

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