This is a great question, and there are many possible answers. And no answer is the correct one, rather it is a combination of many factors that are involved. So let’s look at some, in no particular order.
People Are Not Moving As Often As They Used To
It used to be that people moved, on average, every seven years. Now the average has increased to over every nine years. This brings up another question, why aren’t they moving? The biggest reason I can think of, is that, due to the real estate crash in the mid 2000s, many people owned homes that had a mortgage balance that was greater than what the property was worth. So if people wanted to move, for whatever reason, they couldn’t because they didn’t have the cash they needed to sell.
Lack of Affordable New Construction.
The rate of new home construction is simply not keeping up with the demand. Builders are having problems finding large enough tracts of available land that are near where people want to live. And when they do find land, restrictions and regulations provide an endless supply of red tape to get through. And then they have issues finding skilled people to actually build the homes. Add in the fact that the builders would rather make 15% profit on an $800,000 home instead of a $300,000 home. The entire process begins when someone buys that first starter home. That sell buys a nicer home, and that seller buys an even nicer home, and the cycle continues until someone sells and buys an adult community home.
Many Baby Boomers Are Waiting Until They Retire.
These folks want something smaller, and not all are ready for an adult retirement community.
It is unknown what is happening in Washington. The proposed new tax plan may involve taking away the mortgage interest and real estate tax deductions. This may make the monthly cost of a new home a lot more expensive. And many are waiting on the sidelines until they know for sure what will happen.
These are just a few reasons, but they are valid.
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Bunny and Art Reiman