Structural, Not Psychological Explanation
The years-long shortage of housing inventory has been a head-scratcher for many real estate experts (including this one).
According to Econ 101, rising prices eventually elicit more supply, which cools off prices, which in turn reestablishes market equilibrium.
Except that hasn’t happened the last few years.
If anything, the shortage of inventory has gotten worse, as homeowners delay selling because they can’t find what they’re looking for.
Vicious Cycle
As with many mysteries, however, perhaps the answer is hiding in plain sight.
In this case, that would be the 24 million 1-4 unit residential properties that are now investor-owned, according to Inman News.
Some of those landlords are big, Wall Street players, who literally own tens of thousand of units; at the other extreme are “Mom & Pop” landlords who only have a few rental properties.
Regardless, those units don’t appear to be coming back on the “For Sale” market any time soon.**
Which means, at least in the short to medium run, this time really is different . . .
**Why wouldn’t rational landlords “cash in their chips” and take profits?
Three reasons: 1) strongly rising rents in many markets nationally now, including the Twin Cities; 2) few alternative places to find yield in a still-low interest rate environment; and 3) unattractive investment alternatives, including the sky-high stock market (and even higher Bitcoin — reportedly over $15,000(!) now).
See also, “The Mystery of the Missing Housing Inventory“; and “Housing Market “No Man’s (er, Seller’s) Land”: Explaining the Dearth of Inventory.”