GRAND RAPIDS, Mich. — Beth Heinen Bell and her husband, Christian, like a rising number of Americans, are ready to jump into the real estate market and become homeowners. Yet they are running into an obstacle that’s keeping the national housing recovery in check: There aren’t enough homes for sale.
The housing shortage they face in Grand Rapids, Mich., a city known for its furniture industry and sleek downtown hospital complex, is fairly typical of what the country as a whole is facing this spring.
Some markets along the East and West coasts have grown red-hot. A handful of other cities remain depressed nearly four years after the Great Recession ended. But many more places are like Grand Rapids, a metro area of roughly 1 million that is strengthening slowly but steadily.
Like so many others, this Midwestern city 150 miles west of Detroit never experienced either the buyer frenzy or the price collapse that marked the boom and bust. Yet it too was affected. Prices fell. Homeowners lost equity. And now, many remain unable or unwilling to sell.
The shortage of homes is occurring just as ordinary Americans want to buy again. More of them feel confident about their job and retirement account. Mortgage rates are near historic lows. And prices are rising again, easing fears that new buyers might lose their investment in a home.
“The last four years have been rough,” says Christian Bell, a 31-year-old Presbyterian minister who has been renting a cramped apartment for the last decade. “But housing prices are starting to come back up.”
A tight supply isn’t the only factor slowing what is otherwise shaping up as the strongest spring buying season since the housing boom ended nearly seven years ago. Some Americans have grown to prefer renting. Others who would like to buy lack strong enough credit or a large enough down payment to meet the stricter standards banks now impose.
Part of the reason for the supply problem is that when the housing market collapsed in 2006, many people lost so much equity in their home that they were unable or unwilling to sell. Prices have started to rise, but not enough to restore what many lost. Some still owe more on their mortgage than their home is worth.
Even many who have enough equity to sell want to wait for further price increases.
“Every buyer wants to buy at the bottom, but no seller wants to sell at the bottom,” says Stan Humphries, chief economist at real estate information site Zillow. “They’ve got this hypothetical price that they think the house is worth at the peak, and they don’t want to sell below that.”
Others don’t want to leave. During the depths of the recession, they chose to renovate their house instead of finding a new one. After paying for renovations, they now feel more invested and comfortable in their home.
That leaves many first-time buyers like the Bells, a group that makes up about one-third of buyers, competing for a small number of homes.
Just a few years ago the market was facing an oversupply of homes, one that eventually led prices to collapse. The bust was worst in Arizona, South Florida, Southern California and Las Vegas, where developments kept popping up on vast tracts surrounding cities.