Today, homebuyers buying homes for the first time in once-affordable markets face competition from all sorts of sources that didn’t exist a generation ago: from global capital, from all-cash “iBuyers” that price houses on an algorithmic basis, from institutional rental investors. single-family homes from small investors who run Airbnbs.
“It’s really hard for a tenant owner to compete with the amount of money that’s flowing into this region,” said Dan Immergluck, a professor at Georgia State in Atlanta. There, even in the Sun Belt market with steady new housing development, supply is still not keeping up with demand.
Perhaps at some point in the medium term, the geographic reshuffling of remote workers will stop, slowing price increases in places like Boise, Idaho, and Denver, which have been hardest hit by it. But buyers-investors are not leaving. There are no new technologies that allow you to sell houses much faster.
Rising mortgage rates should help slow home price growth. But they will not affect those who pay in cash. And higher rates will make home ownership even less affordable.
“First-time homebuyers will find it very, very difficult to purchase a home in the next two to three years,” said Mark Zandi, chief economist at Moody’s Analytics. In the meantime, they will pay higher rents, making it impossible for them to save money for a down payment.
It could now take another five to 10 years for working-class households that were on the cusp of homeownership before the pandemic to catch up, according to Ralph McLaughlin, chief economist at Kukun, a company that tracks real estate investment activity. The days of single-earner households buying a decent-quality starter home anywhere in the U.S. may be over, he said, unless that one-earner is a high-paying earner.
“As a housing economist, I’m a little sad to think that it may not be possible to get rid of the difficulties that young households have experienced trying to break into the housing market” during the pandemic, Mr. McLaughlin said. .