It has perplexed local and national real estate experts for several years now. In Arizona it has meant a continued rise of both home values and rental prices – and unfortunately (or fortunately if you’re an existing homeowner or landlord) there doesn’t appear to be any quick fix to our collective problem. Our problem? The amount of housing available now is nowhere near the inventory we need to handle the increasing demand.
“Or to turn a phrase, if we don’t build it, they’re still going to come. And then what do we do?”
And unlike some other states where residents are fleeing, the problem in Arizona is the likelihood, no the reality, of greater population growth in need of rentals and homes to buy. Or to turn a phrase, if we don’t build it, they’re still going to come. And then what do we do?
And now, we may have discovered the mysterious “why” of low inventory, which unfortunately doesn’t have any fix in which to fix this perhaps unfixable problem.
In short, the mystery of no to slow inventory is that homeowners aren’t going anywhere. They’re just not moving! This issue is being called “Tenure Length.” And, according to the First American study, two reasons primarily stick out:
- The majority of existing homeowners have historically low mortgage rates in place which makes it more costly to sell and buy for taking on a higher mortgage interest rate. Now that rates have dropped again to under 4%, will this be an impetus for homeowners to sell and buy? Perhaps, but unless the seller moves out of state, it’s still a net zero inventory gain. Hmm.
- Seniors are aging in place. Freddie Mac, With improved health care and technology many seniors are “aging in place” which means they don’t have to sell as soon due to health issues. We’re living longer and healthier according to the article.
Per the First American article, “Before the housing market crash in 2007, the average length of time someone lived in their home was approximately five years. Average tenure length jumped to seven years during the aftermath of the housing market crisis between 2008 and 2016. The most recent data shows that the average length of time someone lives in their home reached 11.3 years in May 2019, a 10 percent increase compared with a year ago.”
Now, if more millennials start to buy, student credit issues turn around, and the continued business and personal exodus from other states to Arizona continue, there will be even more buyers coming into the marketplace. A great problem for homeowners and landlords, but a crisis for everyone else.