There aren’t enough homes for sale.
It’s a common refrain this spring for homebuyers, who are up against a supply shortage that’s triggered bidding wars and escalating prices. And while the shortage has been well-documented in San Francisco, Seattle, Washington, D.C., and elsewhere, it isn’t limited to the pricey East and West coasts. Middle America is suffering, too.
Of the 10 markets with the biggest drop in inventory last month, five were in the middle of the country. In Omaha, Neb., bidding wars, once rare, now are routine. In Grand Rapids, Mich., the number of homes for sale fell by almost 50 percent last month from a year ago. And in Minneapolis-St. Paul, Minn., the supply of homes is at its lowest in more than a decade.
The number of homes for sale in Omaha has fallen precipitously over the past four years, meaning pickings are slim for buyers, Redfin real estate agent Travis Thomas said. The problem is particularly keen at affordable price points.
“I’m seeing a huge lack of inventory in the $150,000 to $200,000 price range, which serves first-time homebuyers trying to move up from apartment living,” Thomas said. “In Omaha, we had always had two large builders serving that price point, but one went out of business following the last recession.”
In Grand Rapids, which last month showed the largest inventory drop among cities Redfin tracks, starter homes go fast. Sellers asking $200,000 or less usually receive multiple offers the day they put a house on the market, Redfin agent Kent Selders said. But builders aren’t getting the memo. Most lots in new developments are geared toward houses costing $250,000 or more in an area where the median price is $140,000.
Minnesota’s Twin Cities are in desperate need of affordable homes and inventory is lower than it’s been since at least 2004. In Indianapolis, Ind., new construction is popular with buyers but builders can’t keep up with demand. In Louisville, Ky., inventory has cratered over the last 15 months and buyers are having a challenging spring.
Why Do People Want to Live in Middle America?
They’re all affordable by coastal standards (the highest median sale price is in the Twin Cities, at $205,000). And, according to the latest census numbers, each metro, aside from Louisville, has seen population growth that exceeds the national average in urban areas over the past five years.
All are regional economic hubs with unemployment rates below the national average of 5.3 percent. Grand Rapids, Omaha and Minneapolis have unemployment rates of less than 4 percent, making them attractive to job hunters.
In other words, employment is good, prices are (thus far) still affordable and the cities are big enough to offer meaningful cultural opportunities, so it shouldn’t be a surprise people are moving there. But how will each metro plan for the fruits of its success? Without more homes, it will be hard to avoid escalating prices, exurban sprawl and longer commutes for residents.
As these cities grow, plans should be made for increased density, increased demand on infrastructure and car-free transportation options. A refresh of local zoning laws to up density levels would be start, as well as incentives for homebuilders to build at affordable prices in areas close to amenities. After all, no one in the Midwest wants to be accused of being the next San Francisco.