ARI SHAPIRO, HOST:
Many people in the U.S. are shut out of the housing market. Sometimes that's because they can't afford a down payment or have bad credit. Other times it's because there aren't enough homes for sale. This week we are reporting on a new housing crisis, a crisis in supply. Today reporter Ben Markus of Colorado Public Radio looks at some of the powerful-but-lesser-known forces keeping homes off the market.
BEN MARKUS, BYLINE: The housing market in cities like Denver is seized up. It's not working the way it used to before the Great Recession. The problem isn't obvious. And oddly enough, one of the indicators that something is wrong starts with a bathroom remodel.
(SOUNDBITE OF TOOL BUZZING)
MARKUS: In a condo in Denver's Capitol Hill neighborhood, a construction worker scrapes tiles from a shower with a power tool. Remodel activity is at an all-time high nationally and in Denver.
BRIAN PRENDERGAST: Doesn't surprise me (laughter).
MARKUS: That's Brian Prendergast with Professional Home Design. He says he gets two to three calls a day.
PRENDERGAST: So they may do a bathroom and then next year do a kitchen. But they seem to be on track to remodel as much of the interior as they can.
MARKUS: Because rather than compete for a shrinking pool of homes for sale, many homeowners are deciding to stay in their home and spruce it up, which is actually making the problem worse. According to RealtyTrac, Americans are living in their homes almost twice as long as before the recession. That's the situation for Marjie and Ben Vic, who live in a suburb of Denver. They're customizing their starter home for the long term, starting with the kitchen.
BEN VIC: Basically Marjie is not exactly the tallest person on the planet, so there's no top cabinets. Everything's down low. So that was, you know - part of the design intent was, again, making it our own and making it work for us.
MARKUS: They've been here for four years, and these first-time homebuyers couldn't have picked a better investment. The competition for houses in Denver has driven up prices, and their property incredibly has almost doubled in value.
B. VIC: We thought it was pretty incredible until we started looking around to see if there's anything else that we could move into.
MARKUS: Marjie says they really wanted something with a bigger yard. But at every potential house, they got outbid, or they lost to cash offers. Marjie says they're trying to live within their means and not buy a home that they can't afford, you know, learning the lessons of the last housing crisis.
MARJIE VIC: And the market's telling us, if you want to compete, you have to, like, shed some of that, and we're not willing to do that.
MARKUS: Unwilling to put their house on the market and take the risk of overextending themselves, they're not moving. There's another group of people staying put - investors, guys like Charles Roberts. He bought up a bunch of homes at a discount during the foreclosure crisis. The plan seems brilliant in retrospect. But at the time, people genuinely thought he was crazy. The economy was in freefall.
CHARLES ROBERTS: You got to actually put yourself in 2008, 2009 when you're sitting down at a closing only to find out that the bank who was funding the loan just went out of business and everybody lost their jobs. It's - it was really incredible.
MARKUS: But Roberts was able to build a portfolio of 16 homes that he converted to rentals. Roberts and other investors bought in lower-end neighborhoods, and these homes would be affordable options. But...
ROBERTS: I guess I'm the perfect example of someone who has no interest in selling. I figure I'll probably go through two more downturns in my career, and then, you know, I'll be dead. So something will happen at that point, but it won't be my selling my properties.
MARKUS: And why should he? Rents that landlords charge in Denver have risen 50 percent just since 2012. Denver's population has boomed, and the recession created a whole new class of renters.
ROBERTS: There is not an unhappy landlord, you know, in the Denver metro area. I can tell you that for sure.
MARKUS: This isn't just a Denver phenomenon. Since the Great Recession, about 4 million single-family homes in the U.S. have been converted from owner-occupied to investor-owned rentals.
BILL MCBRIDE: And that's one of the key reasons inventory's been low and will probably stay historically a little low.
MARKUS: That's Bill McBride, an economist who writes the blog Calculated Risk. He's famous for predicting the housing crisis 10 years ago. McBride says he's also talked to investors who've done the math and say they'll probably never sell.
MCBRIDE: If they sell a property, they have to pay capital gains, and then they have to find a place that returns, you know, something better than what they were getting. And in general, they - that's hard to do right now.
MARKUS: But it's creating a have and have-nots situation where people with homes are doing well and those without can't stabilize their housing costs or build wealth. Back at Marjie Vic's house, she admits that they're lucky. They've built a mountain of equity. But still they're stuck in this starter home.
M. VIC: Yeah, I think it's - you know, we work hard for what we have and what we want and, you know, what we want our life to be. And it's just a dream that we can't attain.
MARKUS: A dream that's increasingly unattainable for millions of other Americans. For NPR News, I'm Ben Markus in Denver. Transcript provided by NPR, Copyright NPR.