This spring home-buying season should be a coming-out party for Millennials, many of whom are finally ready to make a purchase after hunkering down for years in their parents' basements or expensive apartments.
The only problem: Much of the food at the party is gone, and what's left is priced like caviar.
Although solid job and income growth is emboldening many prospective home buyers, record low housing supplies are driving up prices and curbing sales, especially for Millennials looking to buy starter homes.
"For home buyers, this is shaping up to be one of the most difficult years in recent memory," says Ralph McLaughlin, chief economist of Veritas Urbis Economics, which studies the housing market.
For sellers, it will be a standout spring that brings big profits, unless those sellers themselves are looking to buy a larger home in the same metro area. "It's going to have the feel of a hot market," marked by multiple offers and bidding wars, says Lawrence Yun, chief economist of the National Association of Realtors (NAR).
Already, house hunters are waiving inspections, making offers without even seeing homes and bidding well above asking price. Yet Yun predicts sales will be flat compared to spring 2017 because of the skimpy supplies and reduced affordability for many buyers.
"This year's (spring) buyers may be competing against some of those buyers who have been unsuccessful during the past few months," Zillow Senior Economist Aaron Terrazas says. "Increasingly, the traditional seasonal boundaries around home shopping season … are becoming less pronounced" as the fierce competition forces buyers to lengthen their searches.
Some of the hottest markets in recent years — such as Seattle, Las Vegas and San Jose — have continued to post double-digit annual price increases. Now, they've been joined by cities such as Nashville, Salt Lake City and Kansas City.
Why? Too many buyers chasing too few homes. In February, there was a 3.4-month supply of existing homes nationally, the lowest on record for that month and substantially below a balanced six-month inventory, NAR says. The number of starter homes is down 14.2% in the first quarter from a year ago, according to real estate research firm Trulia.
Not that there aren't buyers' markets. Sales have dipped over the past year in Hartford, Conn., Toledo, Ohio, and Baton Rouge and were flat in Philadelphia and Baltimore, according to Attom Data Solutions.
Yet nationally, the median home price in February was up 5.9% from a year earlier to $241,700, according to NAR. Meanwhile, average yearly wage growth has been stuck at about 2.5%.