Lack of Home Supply, Rising Costs Keep Renters in Place

The latest Marcus & Millichap report finds market conditions that should be beneficial for multifamily properties.

Multifamily renters who may be looking to buy a home are finding tight supplies, escalating prices and increasing financing costs. Those market conditions mean the demand for multifamily rentals will remain elevated, according to a new research brief by Marcus & Millichap.

The report noted the number of existing houses listed for sale in February was down 32.6 percent year-over-year, the largest annual drop ever recorded. The few listings were snatched up quickly with homes staying on the market an average of 20 days, also a new low.

The lack of homes available for sale come at the same time prices to buy a house, both existing and new, are rising along with increasing financing costs. The April research brief states the median price of an existing home was up 16.2 percent year-over-year in February to $334,500.

New home prices rose 5.5 percent to a median price of $347,200. The report notes the 30-year mortgage rate rose above 3.1 percent in the past few weeks, up 40 basis points since early January.

Rising costs of labor and materials, particularly lumber, are also contributing to higher home prices. Higher lumber prices have added an estimated $24,000 over the past year to the cost of a new home, according to the National Association of Home Builders.

The combination is keeping more potential homebuyers out of the market, particularly to many renters who may be looking for homes priced less than $250,000.

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