We’re Out of Excuses For Low Inventory
We’re still talking about the extreme shortage of listings that’s haunting the market and driving prices up. This year, we’ll set another all-time low for the fewest new listings and the last ten years have been the lowest ten years for supply on record!
We’ve had lots of time to figure out how we got here but so far the whole laundry list we’ve come up with to explain the market’s great vanishing act, has fallen short.
When the market took off in 2013, we told ourselves “inventory is low because all those distressed properties have finally been sold. Without those foreclosures and short sales the market is going through withdrawals”. When supply continued to lag, we said “Sellers don’t want to list when prices are low, they’ll hold off until prices come back up.”
Then after prices came back up, we figured: “Sellers are holding off because they don’t want to pay huge capital gains when they sell, they’ll wait until one spouse dies so the other can get the stepped-up basis.” And then, we said, “Sellers are holding back because they don’t want to buy a new home and get a big property tax increase. If only there was a way older sellers could transfer their basis’ to other places in the State!”
Then we said…”Sellers aren’t selling because supply is so low, they can’t find another property to buy and don’t want to be homeless! “ And… “they don’t want to sell and pay the price those smaller homes are going for, if they can’t clear $500k, they don’t want to move.”
And all along we’ve said, “There’s low inventory because we haven’t built enough new homes over the last 30+ years. “ And when sellers weren’t selling because of covid: “Why would they move in the middle of a pandemic?” And now it’s “people don’t want to trade in their 2.85% 30 yr loans for a new house with a 7% rate.”
None of the “usual suspects” really explains why we’ve had 10 successive years of record low inventory. Is it the luck of the draw that random things keep happening to convince sellers they shouldn’t sell? Or is there something more insidious at work?
In real estate, we often get stuck over-focusing on sales data and current trends. Sometimes we miss the WHY that’s hiding in plain sight and staring back at us in the mirror. And as someone very wise once said to me: “short term economic cycles come and go but the big picture is always a matter of demographics.” Is it possible that our own aging faces are staring back at us in the mirror?
Next Week: Aging our way into low inventory and a deeper housing crisis.