The Real Estate Concierge
A new real estate market blog series from Betancourt Realty
Low Inventory Causes Market To Favor Sellers In Real Estate
Recently, the real estate market has been on a slow and steady incline. However, the newest obstacle in a full recovery appears to be the lack in inventory. “The lack of inventory is a big obstacle for the housing market right now,” says Jed Smith, managing director of quantitative research for the National Association of Realtors.
Inventory is being reported at 18% lower than it was in 2013. As a result of this lack in inventory, the market is temporarily becoming one favoring the seller. It is matter of supply and demand. The less homes that are available translates to the prices of homes continuing to rise. Sellers are taking full advantage of the current state of the market and increasing the sales price of their homes. According to Smith, a normal housing market brings about 1.5 million new housing starts a year, but only around 800,000 new homes hit the market last year, meaning supply is not keeping up with demand.
“The Great Recession forced many of the smaller builders to go out of business because they didn’t have access to the credit market and those builders tend to make up about 50% of new home construction.”
The National Association of Realtors reported housing inventory fell 9.3% at the end of December, to 1.86 million available homes, which is about a 4.6 month supply at the current sales pace. According to Smith, a normal market has about a six-to-seven-month supply available. Existing homes, are now the driving force behind inventory levels with previously-owned homes selling more than 10-to-1 to new homes. Smith also states that the number of days a home sat on the market in December 2013 jumped to 72 from 56. However, he suggests that this particular increase may be due to the cold weather.
While much of this may sound like good news for current sellers, what this lack in inventory means for potential home buyers is possibly being faced with exorbitant prices for homes. However, it is not time to panic just yet. Some suggestions for potential home buyers in this market is to start your house hunting early. Starting as early as possible will put you in a better position in a market that is not presenting a mass amount of choices. Refer to a knowledgable real estate agent. Also, consider expanding the area you would like your desired home to be in. Lastly, be very realistic about the type of home you are in the market for. Determine what factors are an absolute necessity versus those that are negotiable.