We’ve been in a buyer’s market for a while. That’s when there’s an abundance of inventory and a shortage of demand from buyers. Consequently, like any supply and demand curve, this raises the bar for sellers, forcing them to compete to get their homes sold.
After a small increase in demand in April, May saw a regression in buyers coming to the market. At the same time, inventory dropped slightly in May.
Relative to the same time frame last year, not including homes that are under contract accepting backups, inventory has risen by 65%. That is a major shift in one year’s time. The number of homes that are pending sale at this time compared to last year is down 27.9% and compared to just last month, down 3.3%.
So what’s going on? Why, with rates still as low as they are, is there resistance to purchasing a home?
No Down Payment
Yes. A downpayment is needed to get into home ownership. Whether it’s 100% down, or 5% down, it’s required. This is the most common objection, and quite possibly the one that people have the most control over, and yet, most don’t have $1000.00 to their name, living paycheck to paycheck, with respectable levels of income. Take the time to cut back on discretionary spending and save yourself a healthy down payment.
Student Loan Debt
Our nation continues to experience the pains of irresponsible lending. Our youth is deeply in debt – deeper than the sum of all our our nation’s credit card debt. Buying a home while strapped with consumer debt or student loans is a recipe for trouble, yet it happens. Each year thousands of students enter the marketplace with no more of a plan to pay off the debt than they planned to pay for their education in the first place. And now, they cannot afford to save for a down payment because their income is lost to Sally Mae.
Flexibility of Renting
I can’t make heads or tails of this phenomenon. While it may seem easier to rent, in the long run, it will cost you more, as you will bear the burden of rising costs of inflation. (Read More: The Most Important Point Regarding Buying Versus Renting)
The Market Crash of 2008
Skepticism abounds as a result of the real estate implosion and market recession. After such a devastating experience, many people are hyper-sensitive to the fact that life includes various types of risk. Home ownership can sometimes be financially hazardous.
Droves of individuals are still reeling from the effects of the market crash of 2008. Credit scores for many people have not yet returned to normal, and in fact, there are still millions of home-owners in this country who are still upside-down in their homes, preventing them from a) refinancing, b) selling, or c) expanding their real estate portfolios.
Fear of Commitment
I’m not talking about the commitment to purchase a home. I’m talking about the fact that 20-30 year-olds are less likely to be forming families as they become more and more independent and less dependent upon the idea of the conventional family unit. This ties into the flexibility of renting. Not only does this demographic tend to waver on ownership, they also waver on relationships and marriage. Many people still view purchasing a home as a measure of finality, when in fact, it is far less risky to their financial future than renting.