Housing demand is climbing while the supply is dwindling, driving the prices up and causing a housing crisis. But contrary to what many believe, a new study suggested that it is not the shortage of newly built homes that is to be blamed for the housing crunch in the United States. A study from Trulia said it is the widening gap between prices of existing mid-level and premium homes.
As reported by USA Today, there is a gridlock in the housing market which makes it hard for first-time homebuyers to acquire a property and for existing homeowners to trade up. Trulia said this is the major culprit why there is a shortage of supply and not the lack of new constructions.
The study cited that an average prime house price in the country stands at $542,805 while the mid-level home sits at $267,845. That's a 17.3 percent price gap compared to the 2012 level. In Dallas, the gap rose to a huge as 70 percent while in Los Angeles it grew to 75 percent. The study also said that many entry-level homes are owned by those who are in "underwater" mortgages. Because their mortgages are higher than the actual value of their homes, they can't sell. In addition, around one-thirds of starter homes are owned by investors who took advantage of the low prices back in 2011 and then rented them out.
Because current homeowners could not trade up, the inventory of starter homes become more limited. And when it is becoming hard for first-time buyers to own a home, rate inflation is surging.
According to Business Insider, the current inventory would only last for 4.4 months given the current selling rate, with available housing in the market at around 860,000 down from 2012's 1.4 million units. With the tight supply, the publication said the U.S. is facing yet another housing crisis.