The Listing Drought

Unknown-1It’s tempting to look at how low the number of active listings has fallen at the moment and chalk it up to being a normal part of the seasonal ebb and flow of the real estate market.

It’s an easy excuse since historically, there are almost always fewer listings at this time of year than in the spring and summer. No one likes putting their place on the market during the holidays if they can help it.  And surely there must be plenty of Sellers out there getting ready to put new listings on the market in the coming months.

Except of course, we pretty much said the same thing last year.  And the two years before that.  And somehow all those great new listings we assumed would be coming, haven’t quite materialized to the degree we hoped they would.  As most prospective Buyers will attest, there have been a paltry few but not nearly enough.

Since we emerged from the depths of the distress market in 2011, when short sales and REOs artificially swelled the supply and comprised almost 30-40% of  total closed transactions,  the sheer lack of available inventory has become the single most dominant factor driving our marketplace.  Significant lack of supply has become a year round condition rather than a seasonal fluctuation.

In 2010-11, everyone was worried about the Shadow Inventory. That was the euphemism given to a huge secret stash of foreclosed homes that people figured all those big nasty banks must be purposely holding off the market.  They were fearful that if all that pent-up supply was somehow released into the marketplace, prices would plunge even lower than the 40% drop they had already experienced.

But ironically instead of torrents of Shadow Inventory flooding the market, we somehow have found ourselves going through an unprecedented  3 year drought marked by relatively few new listings.  One that has pushed prices up dramatically while it has also been shaking up some of the long held beliefs about the market we always thought we could rely on.

Take a moment to consider that this is the fewest number of homes that Santa Cruz has had for sale in November/December in more than 18years.  Add to that the fact that for 44 of the last 45 months, the number of listings has been lower than it was in the same month the previous year. And from my perspective, there is little on the horizon to suggest that real estate in 2015 is likely to be much different than it has been these past few years.

So it begs the question:  Is there something larger afoot in all of this? A fundamental shift in real estate and how we view the nature of homeownership?  To be continued…

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