The housing recovery is coming at a steep price—for both homebuyers and renters. The reasons can be found in the unique supply and demand circumstances that were left in the wake of the worst housing crash in history.
For several years, would-be buyers stayed on the sidelines, unwilling or unable to buy a home. That pushed rents higher. Homeowners, who might have wanted to move up, also stayed put, either underwater on their mortgages or afraid to sink more money into a new home. And builders never returned even close to the pace of historical norms.
Now demand is finally surging again, thanks to higher rents and a slowly improving economy, but supplies of homes for sale are anemic. There were just 2 million existing homes for sale at the end of March, a 4.6 month supply at the current sales pace. A six-month supply is considered healthy. The lack of homes for sale pushed the median price of a single-family home sold in March up 8.7 percent, more than twice the gains housing was seeing a year ago.
"We are not seeing the inventory gains we had expected," said Lawrence Yun, chief economist of the National Association of Realtors. "It's not healthy."