The latest edition of REALTOR magazine just arrived, and I found an article by the chief economist of the National Association of Realtors, Lawrence Yun, quite interesting. The article says that “the inventory of existing homes is at its lowest level in 7 years, while newly constructed home inventory has also hit a 50-year low mark. Falling inventory is causing home prices to shoot up higher and faster than anyone anticipated. The national median of a transacted homes was up 9.5% in August.”
The article goes on to say that the Case-Shiller and FHFA price index are rising as well, at double-digit annualized rates in recent months. As winter approaches here in St. Petersburg, we are seeing inventory levels dropping to numbers previously unseen – as low as 3 months worth. A balanced real estate market is when there is 6 months of inventory – then you have an equal number of homes for buyers as there are listings. But not here in St. Pete (or in Tampa for that matter), we are into a Seller’s Market again.
Fewer homes are listed after Thanksgiving traditionally and inventory tends to be 15% lower in winter than summer. Do you know what this means? Supply and demand! If you have been on the fence about selling your home – now is the time, demand is still high, but supply is very low! I still have plenty of buyers looking for homes, and there is nothing out there for them. This time of year, when inventory is low but buyers are still aplenty, you could even have a bidding war on your hands over a home in nice condition. I see this happen all the time.
To prove my point, as a buyer myself who’d been searching for months for a new St. Petersburg home – I just went under contract finally in October, and we close 2 days before Thanksgiving. Prior to putting in an offer on this home, I had put two previous full priced offers on other homes and was outbid by other buyers. Crazy! Imagine how ticked off I was as a Realtor to not be able to secure myself a home – incredibly frustrating! But alas – as they say – everything happens for a reason. Finally I found a home that I fell in love with more than the previous two, and I successfully beat out another buyer with a competitive offer, and a nice letter to the Sellers. See, people do move around the holiday season! And I’ve finally found my dream house.
If last year’s seasonal decline is any indication (it was even more dramatic at 25% lower inventory), we could see historically low inventory levels this winter. Yun feels that a slight seasonal relief will come for buyers in March, as the Spring buying season gets underway, but a deeper and longer-term issue is the possibility of a housing shortage across many parts of the country.
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In addition to seasonal inventory drops around the holidays, many active sellers will limit or deny showings to would-be buyers.
I suggested this to friends last year and they were the only home open to showings in Westchase in late December 2011. They had multiple offers and sold for over asking as the buyer (executive transfer) HAD to buy a home before year-end. One agent they spoke to tried to put them off until March “when more people are looking”. They went with another agent that understood supply and demand.
I’ve also noticed distinct drops in REALTOR® activity as many take November and December “off”, probably due to their perception of the market being tightened.
Historic information shows a 4% weekly drop in REALTOR® activity from Halloween to Christmas with an overall drop of 30%.
I think this post is on the money with one exception, quoting Lawrence Young, the perennially incorrect soothsayer of NAR. You might as well quote Santa. Your instincts on the local market are much better than Larry’s. He’s been wrong on almost everything for the last 10 years.
Ha ha – I know that everyone thinks NAR is biased, and maybe they are. But the numbers don’t lie. You are right, there are many people who HAVE to move before year end. Plenty of people move during the Holidays. And Sellers who wait might find more competition in the Spring with other listings hitting the market. A Seller who lists now, as I said, might just find themselves reviewing multiple full priced (or over) offers. I see it happen all the time. In fact, I have the sweetest couple right now who have been searching for 6 months for a home in their price range – they want something historic with character, and we keep getting outbid. So frustrating, I want to find something for them so badly!