Unequal Recovery

The housing recovery that began in 2012 has been unequal from the start. About 6 million Americans lost homes in last decade’s crash and needed time to rebuild their credit. Private equity firms such as Blackstone Group Inc. swept in to buy foreclosed properties at deep discounts and rented them back to many of those displaced former homeowners.

Now those people are back in the market, along with the bulging population of millennials eager for their first crack at homeownership. But many of the properties they want have already been picked over. Builders have focused on wealthier buyers willing to pay bigger price tags, and now some areas have too many expensive homes, and not enough where they’re needed.

Affordable homes disappeared first in technology and financial hubs like Silicon Valley and New York, where buyers with big paychecks pushed up prices. Now values are flattening after many would-be homeowners have been forced to the sidelines. In some areas, demand has also been hit by a pullback in foreign buyers and new federal limits on property-tax deductions -- as well as fears that a recession may be around the corner.

But even in traditionally affordable parts of the country, renters worry that if they don’t act, their piece of the American Dream will go to the higher bidder.

“People do at this point in the cycle start getting a little panicked that they need to get into the market,” said Jenny Schuetz, a fellow in the Metropolitan Policy Program at the Brookings Institution. And, with lower mortgage rates, “a lot of people who were on the fence between renting and owning, may look at owning.”

In Louisville, fewer than one-fifth of listings were affordable to buyers in the bottom 30% of incomes in April, according to Realtor.com. That’s down from 23% a year earlier and 38% in 2015. The trends are similar in other low-cost cities from Grand Rapids, Michigan, to Charleston, where only 6% of listings meet that affordability threshold.

‘Clogged Up’

Las Vegas, which was hit hard by the last crash and then sharply rebounded, now is seeing a rapid decline in sales because there’s little on the low end worth buying. Many single-family houses were purchased by investors, and now are rentals. The result is there aren’t enough owners of entry-level homes to move up to the next rung of the ladder, said Thomas Blanchard, president elect of the Greater Las Vegas Association of Realtors.

“Our inventory is clogged up, causing a backup of people that want to buy,” Blanchard said. “It’s a self-fulfilling prophecy -- nobody is willing to move anywhere because they’re afraid they won’t find a house to buy.”