Mo’ Lo Inventory
Continuing the conversation… about low inventory. Go to ….. https://www.brezsnyassociates.com/blog to catch up.
I bet more than a few folks out there are thinking: “Not another column about the low supply of homes! You’ve been beating us over the head with that for years now and nothing has changed! Maybe you should move on. It sounds like a broken record at this point!”
My response: Guilty as charged. I’ve spent an inordinate amount of time talking about low inventory. It’s a broken record ( literally and figuratively) both because we keep breaking records and setting all-time lows for the fewest listings ever AND because low inventory has been the driving force behind all the other crazy things we take for granted these days: multiple-offers, bid-ups, all cash, no contingencies, quick-closes and preemptive offers.
When I talk to Sellers getting ready to put their homes on the market, most take it for granted that they’ll have ten offers in the first five days and that their price will get bid up 20 or 30% over-asking and that they’ll be able to leverage things like “free” rent-back periods after close of escrow. It often doesn’t even occur to them that they might not get ten offers.
But if the active supply of homes on the market were a more normal five or six times the number of listings we have now would we still be seeing multiple-offers? And why would anyone offer 30% above list price let alone give Sellers free rent back periods while they pay the PITI, if there were that many homes to choose from?
Such is life in the longest running, fastest appreciating Sellers Market we’ve ever seen. I spoke to homeowners in Aptos the other day who purchased in October of 2020 at what they thought was an exorbitant price. They were convinced they had overpaid by hundreds of thousands of dollars until they received an unsolicited all-cash offer recently for 30% more than what they paid! Needless to say, that really softened the blow from October of 2020!
For most of the last 32 years that I’ve been a Realtor, the conventional wisdom has been that four to six months worth of active inventory at any one point in time, constitutes a “balanced market.” By balanced I mean, neither a sellers market nor a buyers market, but one with a fair amount of give and take coming from both sides of the equation. Our market hasn’t even been close to having a 4-6 months’ active supply since 2010 when there were still a large number of distress properties languishing from the Great Recession.
Next Week: Factors that have contributed to the shortage of supply.