Market Slowing Down As Shortage Continues

The shortage of available housing continues to narrow, especially for homebuyers seeking homes with a budget of $250,000 or less.

Existing home sales are down for the third consecutive month as a result of the shortage, down 0.6 percent in June. Additionally, construction on new homes slowed down overall in that time. Susan Wachter, professor of real estate and of finance at the Wharton School of Business at the University of Pennsylvania, explains to CNBC that "That sets a price point for the existing sale market as well," adding that current conditions are keeping homeowners off the market longer.

Rising labor, land and material costs are slowing down the supply, "except at higher prices, which is simply not affordable for the great middle, and that’s where we see the hit in ... existing sales," Wachter said on "Power Lunch." Meanwhile, inventories in luxury homes valued in the million-dollar range are increasing slightly, Aaron Terrazas, economic research director at Zillow, said. But, "those affordable, entry-level homes are still facing a lot more demand than their supply," he said.

Read more