After years of dealing with a suppressed market that was fraught with foreclosures, the California housing market has made an impressive comeback in 2013. Instead of a surplus of homes for sale, the market has swung in the opposite direction and now there are more interested buyers than there are homes to go around. This includes Generation X and Y buyers who are finding that the real estate recovery has spelled bad news for their home ownership dreams.
Known as “Gen Rent,” interested buyers in their 20s and 30s have been priced right out of the housing market around the Golden State. Leslie Appleton-Young, chief economist for the California Association of Realtors, recently discussed this phenomenon at the Awesome Females in Real Estate (AFIRE) conference.
Many experts are of the opinion that “Gen Rent” is perfectly comfortable living in a rental world and not dealing with the stresses that come with home ownership. However, according to data from the California Association of Realtors (CAR), it’s exactly the opposite. They have found that about 75% of this age group is interested in owning a home, but it’s the lack of inventory that is keeping them out of the game.
Had they been in a position to purchase back in 2008, their reality would have been very different. Then, inventory levels were high and many foreclosures and REO properties were listed for sale that would have been a good fit with this age group’s budget. However, once investors caught wind of it, they returned to the California market in droves, depleting the stock of available homes.
Today, many homes are being rented out instead of put on the market for sale. Flipping homes, which was once a popular sport in California, has all but dried up because investors realize just how hot the rental market has become, ironically to these same 20- and 30-year-olds that are unable to purchase.
Complicating things further, Generation X and Y buyers usually need financing in order to close on a home, but they’re competing with all-cash buyers. Currently, 30% of offers in California are made with all-cash, the highest it’s ever been. Couple that with the rising home prices, and it’s easy to see why “Gen Rent” is stuck between a rock and a hard place.