The Incredible Shrinking Inventory
There are many home buyers out there today. The know what they want...and they’re not finding it.
In the North Shore market, there has been a reduction in inventory of single family homes since Labor Day of 2011. Of course, we have seen the seasonal increases, particularly in the spring market, but the number of properties coming to market has dropped significantly. Currently in Winnetka and Wilmette, the inventory of homes for sale is at levels that have not been seen in years. Interestingly, the inventory of condos and townhouses, which the market had been flooded with, is also at greatly reduced levels.
Real estate 101: inventory of homes goes down/inventory of "for sale" signs goes up
(Photo courtesy of Nigel Mykura)
There are a variety of reasons for this situation. As I’ve discussed before, most of the “low hanging fruit” has been picked clean. There are few foreclosures coming to market here and when they do, they are generally purchased rather quickly. More short sales are closing. Many of the properties that have been on the market for long periods have finally been reduced to levels that buyers perceived to be attractive and have been purchased.
But why are so few new listings coming to market?
One guess is that some potential sellers who have hung on this long, and are seeing some improvement in the market, are deciding to hang on a bit longer to see if the recovery continues. Others, some who are “under water”, are deciding that as long as they can continue to pay their bills, are finding there is no urgency to sell. In general, there seems to be a sense of complacency among some homeowners who might have had thoughts of a bigger or better home a few years ago.
For buyers, these are hard times.
For sellers, the current market offers a great opportunity.
While I’m expecting the North Shore inventories to grow significantly in the spring 2013 market, there is a major factor which could effect the inventory for years to come.
Now that we have experienced a period where interest rates are at all time lows and legions of homeowners have purchased and refinanced at these incredible rates, we will someday..maybe sooner rather than later...see rates returning to normal market levels. When mortgage rates are 7%, how many homeowners locked in at 3.5% will be interested in giving up those loans?
Not many I suspect.
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