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Real Estate Alert: The Inventory Dilemma!

16 February 2013  
It's all about supply and demand.

Well, it's a beautiful day, but don't get too used to it! We're expecting more cold weather next week, perhaps with a little snow. Hello, this is Gary Edelbrock, and I'm talking with Lee Amble about the new problem to crop up in the local real estate market. But, maybe this is the best kind of problem to have!

Real Estate Alert: The Inventory Dilemma!

Written By: Lee Amble, Realtor/Consultant

It looks like we are already in an inventory shortage of homes and some lots in our area. I feel like it will only get worse in the coming months when buyers arrive for the spring and summer market.

I will try and point out some factors why and keep it as simple as possible. You can expect a future article more in depth on this subject as I feel this is just a start. I'll start with inventory and then buyers.

Inventory Outlook:

Many of you already know I don't believe in past statistics and graphs. My feeling is they are for historians as it's gone and history can't be changed and a waste of time to read. Instead, look back for up to one year and no longer. Really, with this fast moving market, it should be no longer than the past three months.

Look back at those inventories and what lies ahead.

1. Active listings year over year have decreased about 20%.

2. New listings year over year have decreased about 11%.

3. Good, saleable inventory appears to be either short or will be in most price ranges with the largest shortage being from $30,000 to $140,00.

4. From $140,000 to $300,000 - very short.

5. $400,000 and above homes are also getting hard to find good, saleable inventory.

6. Lots $75,000 and under are getting very scarce in Prescott also.

One question people ask is about homes that are on the market for a long time and why have they not sold. I will also try to explain some of the reasons.

1. Overpriced homes do not sell until they are priced properly.

2. Functionally obsolete homes, floor plan style, etc. are many times the cause.

3. Interior condition: It's impossible tell the condition just by driving by.

4. Specially designed homes, many levels, steps, etc. require a special buyer.

Last, but not least, would include examples like log homes and ultra modern homes, which the sellers like, but are not always right for the future buyers. I did see the first great modern design home a couple of months ago. In my estimation, it's the first one in 37 years of selling, but it was really worth the wait.

All of the above will sell with proper price adjustments, but when a seller thinks their home is great, it may not be for future buyers, which sellers often refuse to see and end up with their home on the market a long time.

Future and new buyers:

1. New family formed.

With the slight increase in jobs, we will see many more marriages than in the past, as many people waited a few extra years during the recession and consequently, rent a home or an apartment.

2. Past home owners.

There are now about 40 million renters and in the past, there were about 35 million.

That alone would mean that there are about 5 million people waiting to buy. Many of these renters are people who have lost their home due to foreclosures, shortsales or other reasons during the recession. Many of them will now qualify to get loans as the time limit for many is now over and they can apply for a loan. This is a huge waiting market!

3. Sibling move outs:

In the past few years, many siblings moved back with mom and dad because of job losses, etc. and now that jobs are coming back, they can not wait to get on their own in either buying or renting. The above buyers present a new market of buyers joining up with the ones already looking to make a move.

A. Supply factors:

Housing starts nation wide will remain well below historical averages even with new construction rising 776,000 units last year to move the expected 1.1 million in 2013.

B. Shadow inventory nation wide:

Since hitting a high of nearly 4.3 million units in 2009 still high, but sharply below the peak as a percentage of total sales, distress sales are on the decline. In 2010 and 2011, they were nearly one third of the market, they dropped 25% in 2012 and are expected to be in single digits by 2014.

C. An aging generation:

As people live longer, they are living in their homes longer, which means less homes for sale from this group.

Summary:

If you are both buying and selling, you will just be changing dollars, so it would be a good time to upsize or downsize as interest rates are very low, which won't be forever.

If just buying and not selling, I see local prices increasing this year and next also. There is one 'but' in pricing which is when interest rates start going up, will there be a buying frenzy or will buyers back off? Your guess is as good as mine on that one!

Finally, I do feel like in the long run real estate will continue to be a good investment; one of the few investments you can use and enjoy daily, but, as always, please proceed with caution.

These are my thoughts. Make your own decision on what to do. I hope this "Food for Thought" article will give you some things to think about. Thank you for reading! If you have any further questions or ideas for articles you would like to read in the future, please call me! The call is free and so are my ideas!

Remember, "Experience Isn't Expensive, It's Priceless!"

Selling A Home Is Easy, Doing It Right Is The Key!
Lee Amble, Realtor/Consultant
NATIONAL REALTY OF PRESCOTT
Lee's cell: 928 533-4455
Jan's cell: 928 533-4488
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Gary Edelbrock

Gary Edelbrock

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