The forgotten middle - why transactions are down in the real estate market.

[Chris Webb]

Transactions are down and there is a reason that many people did not see early on. One prominent YouTube (ask @Dion McNeeley) personality saw this and I noticed it months later in my home market of Lynchburg Virginia. The middle of the market is gone. How does this reverberate throughout the market? It limits the ability of qualified buyers to buy on the front end and it will decrease the price of higher-end homes on the back end. With sub 4% and 3% interest rates, this middle is simply just sitting there and waiting for time to pass or another life event to occur before they are nudged to move to another home. Until that time, we will see two separate markets one for first-time/ entry-level homes and one for all the others. In economics, some supply-siders talk about trickle-down economics. In the housing market, it is always trickle-up. Someone buys a starter home for their budget, then moves up every 5-7 years until they begin to move back down. Now the middle of this market is forgotten. You only buy one entry-level home and one retirement home, generally. But in the middle, there are several transactions that are now forgotten! This forgotten middle is the cause of the new, slower transactional market. But... what is the cause of this? 

Be kind on my image, it is from a video explaining the market on YouTube. 

Does the Fed have a hand in this?

Someone recently said the Fed broke housing and it seems accurate as the trickle-up and trickle-down has halted. Those in large homes without kids living with them cannot sell because a smaller home will cost more (this is my sister's situation in Richmond). Those trying to get on the property ladder (not really investors, but people simply looking for a primary residence) are priced out of the market by continual demand increases (demand increases daily, supply does not in this section of the market continuum). How long will this run its course? If I knew that, I would be interviewing on CNBC and with Marketwatch. Since I don’t, I am just like you taking in little bits of information on a dynamic market to make better choices every day.