It’s a tough time to purchase a home in Traverse City, particularly in the downtown area; there’s record low inventory of homes for sale, and those available are typically older, more expensive or both. You’ve likely heard about or have experienced the demand, with multiple offers to buy a home as soon as it’s listed for sale. But what else is behind the low supply? Turns out we’re still feeling the effects of the recession, when new construction stopped.

The demand has been well documented. Jules Yates of RE/MAX Bayshore Properties cites data that shows the median price in Traverse City jumped from $171,103 in October 2014 to $235,000 this October.

He says perhaps the most competitive category downtown is homes priced under $200,000. Inventory of those homes is down 62 percent, while their selling prices are up 33 percent.

“Three years ago, it was like suddenly someone flipped a switch,” he says regarding properties selling under $200,000. “I had a listing on 11th Street, and there were four listings in one block. Now all are reaching the high $300,000s.”

But there’s another force at play beyond demand: the lack of new homes.

When the economy was strong, construction firms around the region were building spec homes. When the recession hit in 2008, the builders stopped building. And as the recession deepened, the skilled tradespeople – roofers, plumbers, electricians – left the area for better opportunities, or returned to school for training in other fields.

“During the peak years of 2005, ‘06 and ‘07, new construction was 18 to 24 percent of sales,” says Bryan Olshove of Coldwell Banker Schmidt Realtors. “The last three years, you can barely make a case for six to seven percent. That’s a third of what it was, and a significant factor to the (lack of) inventory. New construction provided a lot of homes below $200,000. That’s the kind of spec in short supply.”

Now that the recession is in the rear-view mirror, the spec home market is back supplying the market with new homes…to a point. It’s been almost a decade since many new homes were built, so there’s a lot of ground to make up.

“There are not a lot of homes (for sale) that are five to ten years old,” observes Judy Porter of Real Estate One.

And builders are selling spec homes as quickly as they can be built, except that there’s now a much smaller skilled trades workforce here to do the building.

So realtors say buyers have a choice: pay more than they want, buy something bigger or older than they want, look outside of town, or wait.

Older homes have more wear and tear and don’t boast the same construction and technology standards as those being built today. “So you can buy old, beat-up homes that are not energy efficient, or spend big bucks for new construction and wait (for it to be built),” says Porter.

Olshove also notes that large homes are not as popular with buyers. “It isn’t as vogue to own a 5,000 square-foot home as it was in the '90s,” he says.

Yates points to opportunities in other segments of the market, such as vacant land and waterfront in the outlying areas. “I would say anyone looking for high-end waterfront property -- either vacant or residential -- may find some sellers willing to negotiate, especially in the coming winter months,” he says.