Where have all the homes gone? Buyers are out in force but there is so little for them to look at. Since October 2011 the month over month inventory levels have been off at least 10%. ( Oct 2011 vs Oct 2010, etc) Since April 2012 there have been more than 20% fewer homes on the market than the prior year. And since October 2012, that number has been over 30% with January 2013 reaching 36%.
There are several reasons for this decline in inventory:
- Sellers don’t have enough equity to move up or are still underwater
- Very conservative lending practices make it hard for sellers to move up. (Click here for a blog on move up options)
- Fewer foreclosures in our marketplace compared to a few years back.
I will comment on each of these but first the facts. Below is a chart showing the end of month inventory levels since October 2011. The numbers reflect all homes for sale at the end of the month in Fairfax County, Falls Church, Alexandria and Arlington.
# FOR SALE CUR YR
# FOR SALE PRIOR YR
|Oct 2011 vs Oct 2010||4533||5185||-12.6|
|Nov 2011 vs Nov 2010||3859||4474||-13.7|
|Dec 2011 vs Dec 2010||3185||3737||-14.8|
|Jan 2012 vs Jan 2011||3009||3525||-14.6|
|Feb 2012 vs Feb 2011||3033||3495||-13.2|
|Mar 2012 vs Mar 2011||3505||3975||-11.8|
|Apr 2012 vs Apr 2011||3712||4743||-21.7|
|May 2012 vs May 2011||3743||4863||-23.0|
|Jun 2012 vs Jun 2011||3848||4964||-22.5|
|Jul 2012 vs Jul 2011||3521||4891||-28.0|
|Aug 2012 vs Aug 2011||3352||4695||-28.6|
|Sep 2012 vs Sep 2011||3570||4871||-26.7|
|Oct 2012 vs Oct 2011||3111||4533||-31.4|
|Nov 2012 vs Nov 2011||2690||3859||-30.3|
|Dec 2012 vs Dec 2011||2133||3185||-33.0|
|Jan 2013 vs Jan 2013||1909||3009||-36.6|
These includes all homes in all price ranges from single families in Vienna Va between $500,000 and $600,000, condos in Centreville between $200,000 and $250,000, luxury homes in Great Falls above $2,000,000, Townhomes in Fairfax between $300,000 and $400,000, etc, etc. When you divide 1909 homes into these sub categories, there really is not much for any individual buyer to look at. Thus, buyers are once again fighting over limited inventory which puts upward pressure on prices. (However, revised appraisal guidelines may keep things tamped down a bit. Click here for more)
As mentioned, many buyers want to sell but can not. In this market it is virtually impossible to get a seller to accept a contract contingent upon the sale, settlement or rental of another piece of real estate. Only a few families can really afford to buy first and sell later. And even for those that can, needing to carry 2 mortgages may prevent a move up buyer from being able to move up to home they truly want. Rather than compromise, they stay on the sidelines waiting.
Other buyers simply don’t have the equity in their home that will allow them enough of a downpayment to get that next home. They need prices to rise a bit more before they can pull together the funds to make that move. Unfortunately as they wait for their current home to rise in value, the home they want to buy will also be increasing in value so this can be catch 22 situation.
The only positive reason for the decrease in inventory is the decrease in distress homes. Look at the reduction in distress home sales over the last few years. I randomly picked October as my comparison month since it was October 2011 when we passed the 10% number in the chart above
|# distress sales for the month||Total sales for the month||% distress to total|
WHAT DOES IT ALL MEAN
Limited supply and high demand always means upward pressure on prices.
So first time buyers should get in the market now but expect that it may take 2, 3, 4 or more contracts before they are the winner on a particular home. Waiting could mean an increase in price and a higher interest rate which equates to a smaller home and/or a higher monthly payment.
Move up buyers are faced with a dilemma. For the same reasons as the first time buyers should move now, move up buyers should as well but it may not be possible without some creative deal structuring. Each situation is rather unique and for many there are solutions from temporary rentals to seller rent backs to home equity loans. Give me a call so we can talk through your situation and see how to make this happen.
Image courtesy of xedos4 at FreeDigitalPhotos.net