WHERE IS THE INVENTORY? That’s the most common question
asked in our real estate market today. Although current home buyers and
investors know that local inventory is at historic lows, much of the public
only remembers hearing of the surplus of inventory caused by the market
meltdown that began in 2006. For the record,
local housing inventory peaked in the summer of 2007 where monthly averages
were over 5,500 available properties.
Coupled with anemic sales, that market had over 15 months supply of
inventory. But that was then and this is
now.
According to the Fresno Multiple Listing Service (MLS), as of
this May there were only 1,630 active residential listings. This is down 33%
from May of 2012 (2,440 properties) and down 55% from May of 2011 (3,580
properties.) If you see or hear of
national statistics, always remember that those numbers can offer a comparison,
but real estate markets are local
and our numbers can vary significantly. For example, according to the National
Association of Realtors (NAR), nationally the number of homes listed rose in
May for the fourth straight month. In our local market, however, May brought us
the second lowest monthly total of
listings since December 2012.
Historically, real estate markets ramp
up their inventory and sales in the spring and summer months, but this is not
what we’re experiencing. May listings
were down 5.5% from March and 8.5% from April.
Home sales in May were also down from March and April levels. In contrast again, on a national level May
sales were up 4.2% from April and our market was flat. Locally, we’re at a point where the inventory
is so low that it is starting to affect the number of sales; there just isn’t enough product on the
market.
Our monthly supply of inventory is also down to historic lows. Of the 1,630 active listings in May, 949 went
into contract (“pended”). This gives us
an “absorption rate” of 58.2% and in turn a 1.7 month supply of inventory. Therefore, it stands that if no more homes were listed, we would be
completely out of inventory in 1.7 months.
Further supporting our tight market is that the average number of days
on market before a home sells has gone from 66 days 2 years ago, down to 45
days (for April and May.) This is a drop of 32%!
According to NAR, a “balanced”
market would have about 5-6 months supply of inventory. Any more than that and we
start to get downward pressure on prices and when the number falls to 4 months or lower, we begin to have
noticeable price increases. Some
relief is coming from builders who are adding to the inventory with increasing
in housing starts. According to the California
Homebuilding Foundation, there were 782 permits pulled for residential housing
starts in Fresno County for the first quarter 2013. This compares to 483 for the first quarter of
2012 and to 239 for 2011. Builders,
however, are likely to remain cautious and these increases aren’t enough to
meet market demand.
So, is this a good
market for buyers or sellers? The answer is both. Buyers should not expect inventory to significantly
change any time soon. The second large
wave of foreclosure inventory never came in 2011 nor 2012, nor does it appear
to be anywhere on the horizon. Some foreclosed
properties will continue to move through the market, as well as short sales,
but the overwhelming majority of transactions are currently “traditional” sales
with sellers who have equity! In fact, of the approximate 1,600 available
properties today fewer than 14% are represented in the MLS as foreclosures or
short sales.
Buyers have an opportunity right now
to still lock in a 30 year loan at historically
low interest rates, but this window is closing. But that’s not the only reason for buyers to
get off the fence. While Economists argue about the sustainability of current
price increases, most do at least agree that prices will continue to inch
up. Standard and Poors recently upgraded
their 2013 forecast for the S&P/Case Shiller Home Price Index to an 11%
year-over-year increase from their original 8% prediction earlier this year. Now
is the best time to buy. Anyone who delays will most likely face higher prices
and higher interest.
Here’s a few
suggestions for buyers: be patient, if the home you’re looking for is not yet on the market,
we’ll find it for you. Use a great mobile site like
londonproperties.com, save it to your phone’s home-screen, and anytime you
want to know the specifics on an available property listed with any broker, go
to London’s site. Get qualified with Royal Charter Mortgage so that you strengthen
the position of your offer by providing the seller up front with your financial
verification. Be prepared to act fast and make
your first offer your best offer. Most Sellers today are receiving multiple
offers, so you’ll have only one chance to make yours stand out above the rest.
Offer a large deposit and a short escrow. Know what’s important to the seller
and make your terms as favorable as possible.
As a seller you have what you didn’t expect a year or two ago; a market with double digit price increases. Low inventory is helping to make this
possible but this won’t last. And if
you’re a seller that will require a short sale from your lender; remember that
the Mortgage Forgiveness Debt Relief Act
is set to expire December 31, 2013.
The Act benefits underwater homeowners who owe more than their home is
worth and who qualify to receive mortgage debt forgiveness as a result of a
reduction in principal, foreclosure, short sale, or deed in lieu of
foreclosure. Sellers who sell become
buyers themselves. As a Seller, the longer you wait to make a move, the more you
are likely to pay in both price and interest for your next home. In other
words, the sooner you sell, the better off you’ll be in the long run.
Whether you are a buyer or a seller
now is the time to make your move!
If you’re
not convinced yet, read our next article in this same section tomorrow!
