A Big Reason Inventory is Low

While home sales have been very steady and strong, there is one key roadblock that is keeping a lid on further gains in sales.  Inventory.  The lack of available homes for sale has severely restricted the ability for many to find a home (at any price).   There are many reasons for such a tight supply, in today's article, we will focus on Seniors....yes Seniors.

With people living longer and more productive lives, they are choosing to stay in their homes longer than ever before with Freddie Mac estimating that over 1.6 million homes that would otherwise be available as inventory....is locked up by older generations.

Freddie Mac found that seniors born after 1931 are staying in their homes longer, and aging in place. The result is higher homeownership rates for this group relative to previous cohorts. They estimate that this trend accounts for about 1.6 million houses held back from the market through 2018, representing about one year’s typical supply of new construction, or more than half of the current shortfall of 2.5 million housing units estimated in Freddie Mac's December’s Insight. This additional demand for homeownership from seniors will increase the relative price of owning versus renting, making renting more attractive to younger generations. However, a shortfall of new construction puts upward pressure on both house prices and rental rates.

Why are seniors holding on to their homes? The pattern is explained by a few key factors, such as better health and higher levels of education in more recent cohorts. This pattern is likely to increase over time as improvements in health care and technology make aging in place easier (for example, the ability to Skype with a doctor).

Source: Freddie Mac

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