Tag Archives: inventory of homes

Head Scratching About the Market

head-scratchingLet’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.


Choking off the Supply

strangle-17370158Today’s topic: The three most important words in the lexicon of New Normal Real Estate: Inventory, Inventory, Inventory. Actually, let’s toss another Inventory on and make it the four most important words.
Used to be Location, Location, Location.  Then for awhile, when the crazy game of market musical chairs came to such an abrupt end in 2007 – Timing, Timing, Timing was a better choice. (It didn’t matter how good your location was – you still got slammed if you timed it wrong.)
But there’s nothing dictating the good, bad and ugly disposition of our current marketplace more than the sheer lack of healthy inventory available on the mean streets of real estate. Homes ready, willing and able to be purchased.
A few quick local stats – thanks to our friends at Real Options Realty (go to ror.com):
As of the first week in October, there were 663 listings, down 7% from 822 listings one year ago. …The fewest listings for the month of October in at least 17 years. Additionally (only) 471 are active listings. 166 of the 471 active listings, or 35%, are priced over $1Million. There are just 305 active listings in the county priced under $1Million. This is the 32nd consecutive month where the number of listings is lower than the comparable month one year earlier.
Wow!  Does anyone think a ton of new Sellers are going to be putting their homes on the market for Thanksgiving and Christmas? To welcome all those eager buyers tromping through the middle of their holiday dinners?  Not likely.
Where’s all this heading as we peer into the crystal ball of 2014?
Are more earnest buyers out there diligently looking for modest homes on modest streets, somewhere north of $600k and south of $800k,  going to be able to find a home to call their own?
How many Sellers are thinking about putting their homes on the market next spring?  Is that number more or less than the number of would-be buyers who have given themselves a time out, hoping that next spring will bring more equitable conditions to buy in?
Will the logjam break?  Send a flood of glorious inventory washing through the marketplace? Or will the choices get even scarcer?  Will prices keep ratcheting up with each new comp? Will rising interest rates play the spoiler role? 
And while we are asking questions, how the hell did we go from a market where 30 – 40% of the homes for sale were distress properties (REOs and Short Sales) to a market with almost no distress properties and upwards of 30-40% of purchases being all-cash in some areas?   
What happened to that huge shadow inventory that was going to get dumped on the market and drop prices even lower? Did we blink our eyes and miss it? Are we sure our good friends at Chase don’t still have some toxic bank vault of old Washington Mutual homes they are holding in massive reserve?
It’s been an astounding turnaround.  And it’s not really clear where so many of those buyers are getting their cash from.
Contrary to popular opinion, it’s not all “rich investors”.  In fact almost no “rich investors” are buying $800,000 homes in places like the lower West Side or Seabright.
Are regular people making some semblance of a moderate living secretly being replaced by an influx of high-income, stealthy 1% Tesla telecommuters who come in the middle of the night and surreptitiously take their places, like an insidious reprise of the invasion of the body snatchers?
And then finally, if the inventory is so low and prices are rising, why aren’t more sellers selling in a sellers market?  What’s wrong with this picture?
We’ll talk more next week.