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Why is the Housing Inventory so Low? A Generational Wealth and Human Psychology Point of view
If you have been following my blog or channel, a lack of inventory has been the theme for years even before COVID. Now why is that?
There are a lot of reasons but many of them are caused by fundamental change in behaviors and are not easily reverted. In today’s video, we will look at 4 fundamental or structure shift that stops housing inventory from coming to the market.
1. The Great RecessionMany people were affected or know someone that has been affected by the crash of 2008. Homeowners watched their housing value plummet and equity vanishing. Many lost their home to foreclosure or short sale. As a result, a new trend emerged to avoid that burn caused by the lack of equity……people are staying in their home a lot longer. Based on 2020 closed sales, the turnover rate for LA and OC housing market is once every 25-28 years. A lot longer than the traditional 7-10 years.
2. Historic Interest RateAlso a result of the 2008 crash, the inventory has been historically low. Many homeowners who refinanced into a low interest rate decided to turn their home into a forever home or a forever rental.
3. Generational ShiftThe advancement in science and medicine, people are living longer and healthier. The average life expectance of Americans are now at 78 years old. There are about 76.4 million baby boomers whom has been the largest generation population group just until recently. Millennial recently surpassed them. They still do hold majority of the assets in the United States. It is estimated by the federal reserve bank that American age 70 and above holds a net worth of 35 trillion dollars – a bit portion of that includes real estate holdings.
4. Builders Not building enoughNot only were everyday homeowners got burnt during the crash. Many builders were as well. Instead of keeps buying and selling simultaneously. Builders have been release homes at a much slower pace. When a homeowner move to a new build, they have to put their old home on the market as resale. So often time each new build can equates to 2 new listings instead of just 1.
As you can see from that list. most of these reasons that caused a shortage of inventory cannot be reverted or it will take a long time to change. The governments are seeing this and that it why we are seeing a lot of rezoning or zoning variances to allow building of ADUs to allow more supplies…..to control the rent price…to control the housing price.
As you can see from that list. most of these reasons that caused a shortage of inventory cannot be reverted or it will take a long time to change. The governments are seeing this and that it why we are seeing a lot of rezoning or zoning variances to allow building of ADUs to allow more supplies…..to control the rent price…to control the housing price.
I look forward to talk to you soon.
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