Shortage of Housing Inventory- Bubble or a Strong Real Estate Market

By
Real Estate Agent with Samson Properties VA0225077251

 You can pick up any publication or online article they all have similar headlines housing market is tight, inventory is low and so on across the country. 


Low inventory has created some madness in the Northern Virginia real estate market. For me, it brings back the memories of 2005 market when we jumping in the car to check out a home the hour it was listed on the market. Now our scouting the area or neighborhood. If they find a perfect home they want to preview before the home gets on the market. Thanks to social media some of our transactions are done prior to home hitting the open market or MLS. 

With such a high level of anxiety and emotions comes skepticism. Whether this market is real or will the bubble to be burst. Being a Northern Virginia Real estate agent over 13 years I have been through the 2005 market. I can assure you this is not the same marketplace.

How different is 2005 market to current housing market in Northern Virginia area:

1. Even though there are multiple offers on the home buyers are not blindsided with the facts the upgrades or other investments they will have to add to bring the home to the valuation. They all want turn key condition and willing to pay a premium. Many of my home buyers have heard saying over and over we all have money to upgrade but no time to deal with contractors. 

2. Appraisers have been conservative. Some home buyers in Fairfax & Loudoun county are waiving appraisals contingency but the majority are still keeping the part of their contingency. Unlike 2005 our appraiser was drive by appraisal. I remember many times our appraiser didn't even go inside the properties.

3. Lenders are also not pushing LTV (Loan to Value) or Debt to Income ratio (DTI). We don't have subprime loans or creative loans in the marketplace. This is where I am betting my money. Unlike 2005 we don't have lenders loaning money on a no doc loans or higher LTV or DTI ratios. Buyers may be stretching their budget but they are educated about their monthly payments and cost of home-ownership.

What is causing the LOW inventory in the Northern Virginia area:

1. Sellers who are willing to downsize or move up are facing the same challenge as 1st time home buyers or other buyers in the marketplace. They cannot find a home for their families to move into. They are sitting tight and causing lack of inventory.

2. Fairfax and Arlington county where the new construction is above average person affordability. Loudoun has new construction but with the rising prices and land being expensive builders are facing similar challenges. 

3. The anxiety of rising interest rates has caused many buyers not to consider new constructions or wait until the market cools down.

 

4. Many of the home sellers prefer to upgrade and update their home rather than sell. 

 

Bottom line: Bubble or a Stable Market:

Like any investment, we will see a good ride of rising prices along with a high demand. Real estate is a long-term investment. If we do get a downward market for a period due to a political environment or other reasons it could slow down or shift the market. Considering DC metro area whether we have strong employment and income it is unlikely we will be seeing this period as a bubble. 
Remember DC metro areas is still cheaper than New York, San Francisco or Los Angeles. 

Posted by

 
                             
Associate Broker
MRP, ABR, ePRO

NVAR, Life Time Top Producer
NVAR,Multiple Million Dollar Sales Club Member
Samson Properties
Cell - 703-625-4949
Email - info@eNOVAHomes.com
Web: www.eNOVAHOMES.com
 
Residential real estate agent serving Northern Virginia in Fairfax & Loudoun county over a decade and almost $100+M in sales volume experience. 


 
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Ambassador
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Harry F. D'Elia
RentVest - Phoenix, AZ
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It is a crazy real estate market around the country-we do not have enough homes for buyers.

May 10, 2017 05:18 AM #1
Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I went back into the archives here and I've seen a lot of cool things have happened in recent times. Congratulations on all the success!

May 16, 2017 07:14 AM #2
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Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

There is no doubt that the market recovery is being held back by a listing shortage, especially in the lower price ranges. 

May 17, 2017 11:31 PM #3
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Ritu Desai

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