[heran medhin]

Here’s what is happening in the real estate market (At least, in the markets I track) There is a bifurcation, with two different stories happening in the same zip code Story 1 is for affordable* homes: There is absolutely no inventory here. Homes are selling above asking price, quickly, and often all cash buyers Story 2 is for expensive** homes: There is a lot of inventory here. Homes aren’t selling, and price cuts are common Why is this happening? They are two conflicting elements and happening in the same zip codes Answer: the “trade up” buyer is completely gone. In the past, a growing family would “outgrow” their starter home, sell it, and move to a bigger home That one action would simultaneously add supply to the affordable market (the house they sell) and remove supply from the expensive market (the home they buy) This situation is now extremely rare. Even if a family has “outgrown” their existing house, high prices + high rates means cannot afford to trade up to a bigger home Which means they in turn don’t put their starter home back onto the market Which makes the supply issues for starter homes worse A lot of the news stories I’ve seen are missing this nuance. There are articles about home prices falling and articles about bidding wars and low supply Both are true: they are just for an entirely different class of home! Understanding this nuance is important, both to solve this problem and to navigate it as a buyer In terms of how to solve this, increases building is the only long term fix I know of. There is obviously more nuance: read everything @moseskagan tweets to understand this But for prospective home buyers: I think it’s important to know if you are in “story 1” or “story 2” If you have the means, I also think it could be worth renting for longer to save up to buy a “story 2 home”. Less competitive! (Again, means dependent) */**: affordable vs expensive is location specific. Affordable is below median purchase price. Expensive is ~ 1SD above median and greater