A different perspective: "Why is inventory the lowest in 20 years"...

By
Real Estate Agent with Berkshire Hathaway HomeServices 01238708
http://actvra.in/56ry

A different perspective: “Why is inventory the lowest in 20 years”

One of our AR friends from a previous time, wrote on the surface, a convincing article(on another National Real Estate Platform) and tried to explain “Why housing demand continues to outstrip supply, with shortages now at their worst in 20 years…”

This article is such an over simplification and totally disregards what is really happening in the housing industry, hence I would be remiss if I not address it.

Just to summarize the article in case you did not read it:

According to one survey the word is, that 63% of all homeowners are unwilling to move because their current house needs are met…. Then another survey was referenced, that 85 percent of boomers surveyed have no plans to list their home for sale in the next year because they love where they live…

 www.endrebarath.com

The real story is:

  •         for the past sixteen to twenty years, there has been an outward exodus of jobs from our nation. To buy homes people, need to be assured that they can afford to buy them and more importantly to keep them.
  •         The economic downturn of 2007/2008 did little to reassure the potential buyers or sellers, rather it made them more cautious.
  •         The population has been increasing due to many reasons, such as immigration, illegal immigration and of course due to procreation.
  •         People are living longer.
  •         Banking regulations have been tighter to get mortgages.
  •         College loan debts are too high.

I am just scratching the surface, this in turn forced potential sellers to stay put. The above factors have also created an unprecedented demand for additional housing. The rest is simple economics: Supply & Demand. When there is a shortage of homes prices increase, clear and simple.

www.endrebarath.com

It is all about affordability and risk tolerance, NOT about loving and being comfortable where the home owners are living. The people who logically look at things tend to stay ‘safe’. Once home owners see, that it is safer to ‘buy up’ that that is when inventory will increase.

  •         Builder confidence has been weak, all indicators point to an increase in the confidence direction now.
  •         Life events dictate a certain portion of the home buying and selling process and that is just a fact, but it is not to moving force.

Americans love to buy homes, if there is a lack of affordable new construction people will stay put, period. The purpose of downsizing is to mitigate the loss of income and if it is more economically cost effective to stay in the larger homes than to downsize, there is no incentive for the aging population to move. Just as there is no incentive for the younger generation to leave the home of their parents.

This is an observation from a Beverly Hills Realtor, feel free to comment pro or con to my point of view.

Now if you are considering buying or selling a home please reach out to me directly!

 If you are considering buying or selling a home, a luxury home, luxury investment real estate, luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu, feel free to contact me at 310.486.1002 (m) or homes@endrebarath.com or visit one of my websites at  http://www.endrebarath.com.  I am a Pet Friendly Realtor and I contribute a portion of my commission to local animal rescue organizations.

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Rainmaker
612,039
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Endre, 

Congratulations on your well deserved feature! You hit a nerve out there....good for you! This is a topic that needs perspective from all sides. I enjoyed reading your perspective. 

It is a very complicated matter. I believe that though there are national influences, state and local influences generally take precedent. I have owned property in CA since 1972. My husband and I have many family members in CA real estate. 

Prior to Prop 13, taxes were going up so fast that many were having to sell because they couldn't afford living in their home. Fast forward 40 years, and there are many people who can't afford to move and pay the higher taxes on a home of similar value. Even downsizing, a homeowner might pay similar taxes as a home they already own. I think this is why some are leaving the state.  This is just one factor.  It can have a ripple affect though.  

As Anna Banana Kruchten, CRS and Dorie Dillard have stated real estate is local. I agree with that premise. 

In Sedona, the second home market is huge. Many are taking gains from the stock market and buying a vacation or a future retirement home.  Our market was insulated during the great recession...(it was still affected - but much later and not as deep). 

Aug 14, 2017 04:59 PM #48
Ambassador
1,493,545
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Congrats on your Feature post  -- inventory is low here also and agents are either over pricing  or making it difficult  as others have said even here each section is different  Real Estate is local --Key is to be a listing agent

Aug 14, 2017 05:51 PM #49
Rainer
349,060
Sham Reddy
H E R Realty, Dayton, OH - Dayton, OH
CRS

Great article!!!

The purpose of downsizing is to mitigate the loss of income and if it is more economically cost effective to stay in the larger homes than to downsize, there is no incentive for the aging population to move. Just as there is no incentive for the younger generation to leave the home of their parents.

Aug 15, 2017 05:06 AM #50
Rainer
178,970
Chris Lima
Atlantic Shores Realty Expertise - Port St Lucie, FL
Local or Global-Allow me to open doors for you.

Great post, Endre and Congrats on the feature.  This is such a complex subject.  The surveys, as far as I am concerned, are for "entertainment" purposes.  While, I believe some simplification is needed for those without degrees in economics, the over simplification is actually doing more harm than good.  Thank you for digging in.

Aug 15, 2017 05:15 AM #51
Rainmaker
1,282,028
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Yes, this is a complex subject. On the one hand, I agree with the survey - why would anyone move if they didn't have to move? I certainly don't want to go anywhere, and none of my friends have expressed a desire to go find a different home.  I can see young people moving as their families grow - they might need a larger home.

I can also see older people moving to a smaller home - as long as they have no ties to the land. I can see buying a second home in a different climate - becoming a "snowbird."

Then there are people whose jobs compel them to move.

I knew one elderly gentleman who just enjoyed moving. He bought a new home and sold the old one about every 6 or 7 years - but always staying in the same area because he had a lot of friends here.

But all in all - for most of us - why would you move if you liked where you lived?

Aug 15, 2017 08:41 AM #52
Rainmaker
513,616
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

Endre ... Thanks for sharing your good article on why homes for sale inventory is so low. 

Here in CA the primary reason seems to be that new home building has not kept up with homebuyer needs since 2009, which resulted in more buyers than sellers, which forced prices higher, and then affordability dropped.

Also some baby boomers seem to be stuck where they are in homes where equity is up, but they might not be able to afford if they were in the market as buyers.

Aug 15, 2017 08:53 AM #53
Rainmaker
249,428
John Wiley
Jones & Co. Realty - Cape Coral, FL
Lee County, FL Real Estate GRI, SRES,SFR,PSA

Real Estate is a very complex business. To oversimplify the data is to miss a lot of the dynamics that are in play.

Thanks for sharing your counter to what is being said in the media.

Aug 15, 2017 10:44 AM #54
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

James Dray  not only buyers but other agents start hounding the builders:)Endre

Aug 15, 2017 10:59 AM #55
Rainmaker
38,100
Luke Acree
ReminderMedia - King of Prussia, PA
Making Agents Memorable

Hmmm. We need more builders 

Aug 15, 2017 11:49 AM #56
Rainmaker
519,604
Nick & Trudy Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtors, Philly Main Line

We have seen friends stay in their homes for 20-25 years as their kids went through the school system. Now, they are thinking of moving but the cost of moving makes it sensible to stay put, however many of them are slowly selling off the big family home and seeking somewhere to play with their toys in warmer weather.

Aug 15, 2017 01:21 PM #57
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Edward Gilmartin  indeed and to boot affordability...Endre

Aug 15, 2017 11:22 PM #58
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Nina Hollander  yes time is an issue, but then again, I could not help myself...it really sat wrong with me, Endre

Aug 15, 2017 11:24 PM #59
Rainmaker
326,955
Steven Beam
RE/MAX Alliance - Parker Colorado Real Estate. - Parker, CO
Parker Colorado Real Estate

What I see in Colorado...

Builders didn't build for 5 years. The homes that should have been built during that time are being built now. They are playing catch up for not building for these years. This created a shortage.

 

Colorado has had a massive influx of people relocating here for jobs and some for pot. In 2015 over 100,000 people moved to Colorado. Huge demand.

 

Hedge funds and large investor groups bought up thousands of homes in the market crash and these homes that should be in our supply of homes to sell are now rental properties.  This created  amassive shortage.

 

Youger generations are finally coming out of their parent's basements and into the workforce, getting married and having kids and of course wanting housing of their own.  More demand.

 

Aug 16, 2017 08:17 AM #60
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Jeff Pearl  indeed you are lucky in that respect, and I would tend to guess the minority in the country, Endre

Aug 16, 2017 08:32 AM #61
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Dorie Dillard  many people all over the country would agree with your point of not understanding CA politics:))Endre

Aug 16, 2017 08:33 AM #62
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Richie Alan Naggar  yes not knowing is always a reason to fear, hence  caution comes into play and of course to boot lack of affordability does not help either....Endre

Aug 16, 2017 08:36 AM #63
Rainmaker
382,792
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Specializing in Brookside, Waldo, Prairie Village

There is speculation on this topic in my office.  I think there is a shortage of inventory in some areas...for example, one level living for seniors priced below $300K--same thing for first time buyers--need inventory in the $200-$300K range.  I am talking of the areas I work here in KC.  There is a glut of new builds priced at $500K and up

Aug 16, 2017 12:52 PM #64
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Debb Janes EcoBroker and Bernie Stea JD  always appreciate your comments and the support, Endre

Aug 16, 2017 02:02 PM #65
Rainmaker
2,325,905
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Bruce Kunz  indeed perceived or real makes one hesitate, Endre

Aug 16, 2017 02:03 PM #66
Rainmaker
91,754
Stavrula "Sam" Crafa, RNC,GRI, CDPE, PSA
Future Home Realty - Seminole, FL
Providing the integrity and service you deserve.

I know I have no plans on leaving my home and I've been in it since 1985. Perfectly happy. 

Aug 16, 2017 09:34 PM #67
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Rainmaker
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Endre Barath, Jr.

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