By: David Randall and Nichola Groom
Updated: August 10, 2016
NEW YORK/LOS ANGELES (Reuters) – Seeking a yard for her two dogs and proximity to her new government job, Alison Owen set out to buy a home this spring in the hot market of Austin, Texas.
Owen’s real estate agent warned the 28-year-old that she would face stiff competition in the market for entry-level homes – and he wasn’t kidding.
Owen had to offer $215,000 for a property listed at $198,000 to fend off at least nine other bidders for the 1,200-square-foot home in the sought-after neighborhood of Wells Branch.
“I definitely spent a lot more than I thought I was going to spend,” Owen said.
Similar scenarios are playing out across the United States. Low interest rates and an improving job market have created a wave of prospective first-time home buyers, but they’re being stymied by a dearth of available starter homes.
Nationwide, the inventory of homes costing $250,000 or less fell more than 12 percent between June 2015 and June 2016, according to the National Association of Realtors.
The shortage stems from higher labor, land and building permit costs that have caused construction companies to focus on higher-end homes that bring more profit. In addition, institutional investors are snapping up affordable homes by the thousands in select markets nationwide and converting them to rentals.
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