Where did all of the listing go? Where’s the inventory?
That’s a common question today as eager home buyers are wondering if they’ll ever get a house. As we said in an earlier post, it’s not that there aren’t enough homes coming on the market, it’s that they all sell, and so it appears there are no homes to buy.
We’re getting enough questions about the hot housing market that we thought it warranted an attempt to explain what the reasons are for what Mr. Shiller (of Case-Shiller) would likely refer to as “Irrational Exuberance” after a book he authored by the same name.
Before we show you the numbers, which in some cases are absolutely mind boggling, we’ll proffer our explanation.
Our economy and the housing sector are recovering from the longest and most devastating housing downturn since the great depression. Home values plummeted for five years in a row in the end making home ownership more affordable.
As seen in this graph, home affordability peaked in 2009, yet sales were still dismal. Even with reduced home prices and record low interest rates buyers were afraid to take the plunge into home ownership.
There were still several obstacles which buyers had to overcome. Confidence in the economy and confidence in job stability. Even though home affordability peaked in 2009 potential home buyers were worried about the economy and their jobs. To compound the reluctance to move forward there was the deep rooted psychological trauma in the wake of post bubble bursting which was enough to keep most skeptics on the sideline for a few more years.
We saw things begin to change in 2011 when we were being inundated with new hires in the tech sector moving from out of state and requesting our assistance in securing a one year rental. It was the first sign that 2012 housing might pick-up—and it did.
In 2012 the “Buy Now” light switch was flipped on and buyers came out in droves to bid on the few home available. Why did so many buyers elect to more forward all at once? Because they all enjoyed the same motivating elements—America was on sale, interest rates were at historic lows, and now with companies hiring again, buyers felt comfortable in their jobs.
So in the wake of the greatest housing downturn in U.S. history, it seems plausible that might be going through a rebound equally as dramatic.
How long can this last? More “Equity Sellers” are being created every day as home prices replenish the equity lost during the downturn. More homes for sale will help the current historically low inventory levels (San Mateo County has less than two months of inventory and Belmont less than one). But don’t expect prices to drop anytime soon. Even higher interest rates have had little affect on the prices of Peninsula homes.
Now onto the numbers...This is our post about the first quarter Belmont home sales. Here you can see how low inventory levels have created overbids averaging 114% of the seller’s asking price.
The partial title is a tribute to the endless hours my father would play the Kingston Trio’s “Where Have All the Flowers Gone” which harkens to the days of the Vietnam War resistance. If you are old enough to remember that little ditty, I’m sure it’s stuck in your head by now too…
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.