If you’ve been in the market for your dream home, you may have found that it’s particularly difficult to find one right now.
Housing inventory has rached historic lows across the country, and competition is heating up.
According to an analysis conducted by real-estate site Zillow in April, there are 3% fewer homes on the market than there were a year ago. Homes are also spending less and less time on the market. Nationally, it takes an average of 103 days for a home to sell, compared to 144 days in 2010.
That number is now as low as 54 days in hot markets like Seattle, Denver, and Sacramento, where bidding wars have become common. Nationwide home values are up 7% over last year. Many homeowners are holding off on listing their homes for sale because they want to avoid entering a competitive buyer’s market, further tightening inventory.
“In places where inventory is particularly tight, there’s conflict between everybody,” Skylar Olsen, Zillow’s senior managing economist, told Business Insider.
One of the most significant changes that has happened in recent years is that millennials, the nation’s largest living generation, are buying homes for the first time. Right now, the median age of a first-time homebuyer is 33. Millennials – defined by Zillow as being between the age of 18 and 34 – are 56% of America’s first-time homebuyers (the largest age demographic).
Millennials also make up 42% of all homebuyers overall, first-time or not.
And while baby boomers make up a much smaller portion of homebuyers, the two generations may end up competing for the same type of home, despite being in completely different phases of their lives.
“The size that a millennial buys and the size that a boomer buys is not wildly different,” Olsen said. “Millennials buy a 1,800-square-foot home on average, and a baby boomer buys a 1,950-square-foot home. The other generations are away from those.”
Of course, there are many differences between a millennial buyer and a baby boomer buyer. Millennials’ lives are changing rapidly, and they need their homes to match those changes, while baby boomers might be considering downsizing. According to Zillow’s findings, baby boomers are much more likely to consider a wider range of homes, including manufactured housing and condos, than the average buyer.
Millennials, on the other hand, tend to overestimate what they can afford in terms of housing.
“They’re usually looking for slightly different things, but where they end up, they follow each other pretty closely,” Olsen said.
Many millennials are also skipping the traditional “starter home” altogether, in part because of how competitive the market is now.
“One of the things that we find is that millennials are looking for affordability, but because it’s such an issue, and competition is so high, and so many of those low-end homes are renting rather than being available for sale, they tend to be skipping starter homes and looking for something larger,” Olsen said. “It’s so hard to buy a home that the idea of buying a home just to move five years later doesn’t seem like a viable option.”
The bulk of millennials are still very young and not making those big life decisions just yet, so we have yet to see how large of an effect this age group will have on the market. Still, it’s safe to say that despite what many have believed to be true of millennials, those between the ages of 18 and 34 are indeed choosing to buy homes (and expensive avocado toast), and unless more inventory comes online, they may face the same problems.