Perhaps you’ve noticed that it’s getting more and more difficult to find an affordable house. In fact, in many cases it’s difficult to find any house. One of the biggest complaints I hear from buyer agents in my office is that there aren’t enough homes on the market. I totally get it. I am both a listing agent and a buyer’s agent and I can tell you that when I list a property it goes fast. It’s no longer a question of a property sitting too long on the market as long as the seller is reasonable about the value of their home. Don’t get me wrong, home seller’s still need a very experienced Real Estate Agent to protect them from the many complications that can and will happen throughout the deal.
HOW TIGHT IS THE MARKET REALLY?
Historically, the housing market is balanced when there is 6 months worth of inventory on the market. Currently, the market has 3.9 months worth of inventory. Guess what? That’s not the whole story. Out in the world it feels a lot tighter than that. So what’s really going on here?
FEWER DISTRESSED PROPERTIES
Homeowners with a distressed property are 4 times more likely to list than those without. As we all know the housing market is booming and most homeowners who were in distress either sold their home or are no longer under water. This means that a big portion of aggressively priced housing is no longer on the market.
BOOMERS ARE STAYING HOME
For the most part boomers own their own homes. No problem there but let me throw a statistic your way. According to Realtor.com 85% of boomers say they will stay put over the next 12 months. It seems they don’t have the need or the desire. Also, in a rising market someone who wants to down-size will not be able to find a smaller home that would cost all that much less. The boomer’s real estate is another large segment of potential listings that never get to the market.
HOMEBUILDERS HAVE NOT FULLY RECOVERED
The housing crisis of 08-09 was devastating to homebuilders. Over a million and a half residential construction workers were laid off and barely half that number have been replaced. Homebuilders say that it’s just too hard to find good labor and maybe it is. After all, many of the workers who lost their jobs left the industry altogether. On the other hand, many economists say that higher pay would go a long way to bring back the needed manpower. There’s also the very real concern that a worker who comes back to the industry may have to live through yet another housing crisis in the future.
LANDLORDS ARE HOLDING ONTO THEIR INVESTMENTS
Why shouldn’t a landlord hold onto a property? Housing prices are on the rise. There’s high demand for places to live and so rents are on the rise even faster than home prices. There’s just no incentive to sell.
LOW MORTGAGE RATES
Homeowners have bought and refinanced at all time low and is saying that they must go even higher. Put yourself in the homeowner’s shoes. If they sell, to get the same monthly payment they would have to downsize. Less house for the same money does not sound like a good deal.
NOT ENOUGH EQUITY
While most homeowners have recovered from housing crisis, they simply don’t have enough equity to make it worth selling. Think about it. When one sells their house there are upgrades, closing fees and commissions that suck up some of the equity a buyer thought they had. What’s left better make it worth their while otherwise, why go through it in the first place?
LARGE INSTITUTIONAL INVESTORS
Wall Street wants to be your landlord. Sounds pretty scary, but that’s what’s happening. Massive institutional investors have been buying up huge blocks of single-family residential homes. Now, when I say “huge blocks”, the number is actually around 300,000, but that’s still a lot of houses out of circulation.
Environmental protection, infrastructure fees, permits and rules that specify lot size make building new homes less attractive for big construction companies as well as private builders. The cost becomes prohibitive. The only answer would be to price the house accordingly, meaning priced out of the market.
Now, I don’t want to discourage you. I truly believe there’s the right house out there for everyone and if you’re the seller, there’s always the right buyer. I just want you to be prepared so you have realistic expectations and therefore a much better chance of finding and buying your dream-house.
Now, if you are a Real Estate professional in this space or you’d just like to work with the above 50 market in any capacity, I’ve got great news. I will be teaching a Senior Real Estate Specialist designation course coming in March 2018 so save the date and reach out to me at toni(at)tonipatillo(dotted)com for updates.