Rents are on the rise in most every market and there are few, if any, signs of a slowdown and it all relates to existing home sales. The most recent report on home values showed once again the price of existing homes are still on an upward climb with November data showing a 5.8% increase year-over-year and coming off a 5.5% pop for October.* Yet rising prices are still leaving many first timers on the sidelines which of course drives up rental rates. In December, pending home sales—those with sales contracts on them yet to close—rose a paltry 0.1%.

And while the demand is still there the supply isn’t keeping up and the current supply of homes for sale is now at a 10-year low. That’s 2006 folks and the dearth of inventory is helping to prop up home sales. Builders are building but seem to be catering to the more seasoned buyers and not to first time home buyers. According to a report on today, not only is the supply of new homes falling, the ones that are being built are not the starter homes first timers go for as those homes priced under $200,000 represented just 19% of all listings for new homes, down substantially from 23% just two years ago.**

This data only confirms what real estate investors already know—real estate investments will cost more in the future but the cash flow will still be healthy due to the demand for rental property and the lack of available homes for first-time homebuyers. At some point, builders will recognize they can sell more homes at a lower price and cater to the first time home buyer market but for now and the foreseeable future that won’t be the case as builders see more profit in higher priced homes.

*S&P/Case-Shiller 20-City Home Price Report for November 2015

**, January 28, 2016