Let’s just plunge in, shall we? Last week’s column ended with a rather plaintive question directed at no one in particular. Just a head-scratcher tossed out in the general direction of the Universe-at-Large: “What’s wrong with this picture?”
We were talking about a growing conundrum. One of those riddles wrapped in a mystery, tucked inside an enigma. The enigma that is the real estate market right now. A market increasingly defined by its sheer lack of available inventory – a.k.a – options, choices, supply.
Inventory. The thing most regular people simply refer to as “homes to buy”.
Make the rounds through the open houses this weekend. Become a fly on the wall. Eavesdrop on random conversations coming from different rooms. You’ll hear a lot of similar refrains. A litany of recognizable leitmotifs echoing through the various halls.
Things like: “When are more places coming on? There’s nothing to look at. Nothing worth buying. Too dated. Too small. Too much work. Good ones are gone too quickly. Too much competition. Prices bid up too high. We’ve been looking too long. Interest rates are going up too far.”
Sounds all too “too” familiar to us Agents. Just to offer a frame of reference grounded in actual data rather than buyer chatter – let’s repeat a few stats from last week.
The inventory of homes in SC County this October was the lowest for any October stretching back 17 years! For the last 32 months in a row, the number of active listings each month has decreased from the same month the previous year.
In other words – this shrinking inventory thing isn’t new. It’s been ongoing for two and a half years. Where it stops? Nobody knows.
Basic supply and demand suggests that as buying increases, the supply of homes shrinks. People pay more. As prices rise more Sellers put their homes on the market. The supply of homes rises to meet demand until some kind of equilibrium is achieved or tipping point reached.
We know supply is shrinking. We know prices have gone up. The median has risen this year from $485,000 to $647,000. The overwhelming impression is it’s a Sellers market. Which begs the question.
Why aren’t more Sellers Selling in a Seller’s Market? If more Sellers don’t sell, more Buyers won’t buy. If more Buyers don’t buy, prices won’t go up and convince more Sellers to Sell. Things get stuck!! A logjam ensues. The market doesn’t function.
Here are a few reasons more Sellers aren’t Selling.
– Sellers aren’t just Sellers. They are Buyers too. They need a roof over their heads when they sell.
There’s not enough new construction locally to create significant new supply.
– The same low inventory that makes prices go up for Sellers makes it harder for them to buy. Their choices are limited.
– As prices go up for Sellers, the prices of the things they want to buy go up to.
– Today’s prices haven’t risen to their previous highs. Many Sellers still don’t have enough equity to go anywhere. Many are still underwater or just treading the surface.
– Loan regulations have changed. No or easy qual loan options have disappeared. Many Sellers can’t qualify to move without selling first.
– It’s very difficult to Sell and Buy at the same time in a market with such low inventory.
– The inventory of rental options is even worse than the number of homes for sale. And tougher to navigate. It’s difficult to sell a house, rent one, then buy another afterwards.
Anyone recognize themselves in any of the above? Let’s continue this next week.