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The effects of low inventory.

By
Real Estate Agent with HomeSmart SA541769000

In many places around the country, the inventory for resale homes continues to be very low in comparison to demand. The result has been accelerating prices particularly in the lower and middle price points. But accelerating prices are not the only factors that have made this market the most unique we have seen in many years. Aside from the usual supply and demand issues, low inventory has created several other situations that have affected home sales.


Sales are down.

Pure and simple, fewer houses to sell results in fewer sales. According to the National Association of Realtors® (NAR) Pending Home Sales Index (PHS), home sales have now fallen on an annualized basis for the fifth straight month.

 

Prices are accelerating faster than buyers can save.

Entry-level buyers are finding it hard to keep up with accelerating prices. Trying to save for a down payment or even setting a budget for purchase has become more difficult. Much like a dangling carrot, every time they think they have found the correct price point it moves away from them.

Valuations are more difficult.

The combination of fewer sales and rising prices have made it difficult for agents to find comparable sales and has affected the pre-listing market analysis. Neighborhoods that used to sell 5, 6 or 7 homes per month may only be selling 1 or 2. The downstream result has also affected appraisals, causing appraisers to look farther away from the subject and further back in time to find comparable sales.

Sellers are drawing a harder line on repairs.

Sellers may choose not to update or repair many small cosmetic items, simply because buyers are so happy to have a contract they are willing to accept a less than perfect home. In the past, many sellers had no choice but to update and repair because the house down the street was nicer. But now the house down the street is not for sale. So sellers have adopted a “take it or leave it” approach.

More competition for listings.

Competition for listings is causing a lot of pressure on agents to provide additional services like expensive marketing, lavish staging, paying for repairs, and in some cases reducing commissions to secure the listing. Not only is the competition fierce amongst local agents, but large iBuyer companies like Offerpad, OpenDoor, and Zillow are creating a smaller listing pool for traditional brokerages.

While many see this current Seller’s market as just a swing of the pendulum after years of Buyer’s having the advantage, this market has brought about some interesting if not business altering changes. By the time the pendulum swings back we may be looking at a very different real estate model and a very different market for both buyers and sellers.

 

 Joe Domino is a Realtor® serving the Phoenix & Scottsdale metro area. You can find more great information by visiting his website at www.Scottsdale-AZHomes.com.

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