And this time the crisis is all about one thing: supply
- First time on record with under 10,000 Listing System-wide
- Pending Homes outpace New Listing by nearly 5,000 Homes
- Inventory down 25% from a Year Ago
“The limited number of listings in several markets means that many available homes are receiving multiple offers and going under contract rather quickly,” says NAR President Tom Salomone. That's putting the squeeze on buyers.
While all real estate is local, the problem is national. From coast to coast, buyers shopping in this spring market are finding less and less. What is listed is going fast — and selling at a premium.
In Southern California, home sales in February were 14 percent lower than the average for the month going back 30 years, according to CoreLogic. There are plenty of potential buyers out shopping, but they simply can't afford what they find.
"Activity continues to be constrained by the decline in affordability and the relatively thin inventory of homes for sale," said Andrew LePage, research analyst at CoreLogic. "San Bernardino County, which has the region's lowest median sale price and entices many first-time buyers and others priced out of coastal markets, was the only Southern California county to post a year-over-year increase in sales this February."
Housing starts are still only about 75 percent of their historical average, and what the builders are putting up is in the pricier, move-up category. The biggest problem is starter homes — the severe lack of them. Builders say their costs for land, labor and materials are too high right now, and starter homes squeeze their margins.
Looking at the historical jobs-to-building permits ratio, the NAR research team identified the follow markets as having the greatest need for more single-family housing starts:
But builders aren't the whole crux of the problem. During the housing crash, investors purchased about 4 million distressed properties, the vast majority of them low-priced, starter homes. The expectation was that they would wait until home prices recovered and then sell them back out into the market. That has not happened, despite home prices exceeding their previous peak in some markets.
"Investors came in to get that cash flow, and the cash flow remains very positive," said Lawrence Yun, chief economist at the National Association of Realtors. "The price appreciation is just extra gravy that they're witnessing, and they're saying they're going to ride out this price increase."
Strong price appreciation may also be adding to the lack of supply of homes for sale. On average, the more a local market has recovered, the larger the drop in inventory it's seen, according to a new survey by Trulia.
"If you have a lot of equity in your home, that could be great to use to buy another one, but if that other home you might buy is that much more expensive than it was last year, you may stay put and you may renovate instead," said Ralph McLaughlin, chief economist at Trulia.
The end result however is simply this: We are all experiencing a severe lack of housing inventory the likes of which few of us have ever seen. In todays market bidding wars, all cash offers, waived contingencies, and countless other concessions are the norms and appraised values seem to be irrelevant. As a home buyer or seller, you need to make sure you have a broker working with you that understands the intricacies of the current market, who can carefully explain to you the benefits and risk of each option, and who can then get out there and either help you "Win" at buying your next home, or on the other hand to be the "Winner" when selling and take maximum advantage of the current sellers market.
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