Tuesday, April 21, 2015

Lack of Inventory

Wouldn't it be ironic if the real estate recovery ended up being hampered more by lack of listings, as opposed to too many listings?  When we think of down markets, we think of lots of unsold houses, because people aren't buying.  If you talk to real estate professionals around the country now, they will likely tell you that people aren't buying because they can't find anything they want to buy.

How can this be true?  Shouldn't there be plenty of homes, especially here in Connecticut, where the recovery has been much less robust, and, indeed, where prices are still declining?  Actually, it makes sense, if you think about supply and demand.  The supply here is not keeping up with demand, because owners don't want to list if they can't recover their costs, or get the profit they thought they would.  They know that prices are declining still, and that the average home is worth 20% below what it was worth in 2006.  That, in many cases, deters them from trying to sell.  What is on the market has, in many cases, been there for some time, and isn't being shown.  Sometimes those properties are overpriced, and sometimes they have location, condition, or other issues.  Buyers aren't going to "overpay", especially if they need a mortgage, so those homes just sit.

What we have seen here, however, is that buyers will pay at or above asking, if they see something good, because so many people are bidding on what is available.  Therefore, new listings often have multiple offers on them, because good properties are rare, so paying more is not overpaying, it's an increase in the market rate.  And there's the law of supply and demand, played out for you in real estate.