5 reasons for low housing inventory in Metropolitan Seattle.
The biggest problem facing the real estate industry right now is low housing inventory. Too many buyers chasing too few properties.
Why aren’t there more homes on the market? There are several reasons.
First, many homeowners are still underwater on their mortgages, so unless a life-changing event occurs, they are likely to delay selling. Loss of a job, relocation due to a job and divorce are the most common reasons for homeowners to consider selling. When this happens, it can be helpful to contact a broker to help assess the current market value of the home.
Second, even if a homeowner is not underwater, they may not have enough equity to leave them with money for a downpayment on a new home. Breaking even is not the goal of most homeowners. In the past, homeowners were able to use the equity created by increasing home values to finance a “move-up” purchase. Those plans may be delayed as they wait to regain lost value.
Third, savvy investors — particularly those with lots of cash — have been snapping up inexpensive properties since the bubble burst. Rather than flipping them right away, many are turning them into rentals until they gain more value. That means fewer properties are available for sale.
Fourth, some banks have been favoring Short Sales and loan modifications, which slows the rate of foreclosures coming on the market.
Fifth, the amount of new construction slowed considerably during the recession because builders couldn’t get financing. Speculative building is risky even in the best of times, so it’s not surprising that it nearly came to a standstill for a while. Once new construction starts up again, there is generally a lag of 18 months to 2 years before the new supply hits the market.
Buyers, on the other hand, have been spurred on by low interest rates and — in the Seattle area — improving economic conditions. The Law of Supply and Demand always, always, always wins out. As a result, we are seeing multiple offers again, with many properties selling within the first week they come on the market. (Note: this is only true for appropriately priced properties. Over-priced properties never sell quickly.)
You may be surprised to hear that real estate brokers dislike multiple offers as much as you do.
If we are representing a buyer, the chance they will be disappointed increases — sometimes, dramatically. It can be quite expensive in terms of time, emotion and money (e.g paying for pre-inspections). Buyers who make unsuccessful offers on several properties become understandably discouraged and may even drop out of the market. It’s no fun for a broker to have to tell their buyer that they didn’t get the house they wanted.
You might think that sellers (and their agents) love getting multiple offers, but it can create problems for them, too. Evaluating the offers and deciding which one to take isn’t as easy as just accepting the one with the highest offer price. Among other things, the broker needs to verify that the would-be buyer actually qualifies for a loan in the amount of their offer. There is also the potential for the offer price to exceed the eventual appraisal price, which usually causes the transaction to fall apart. If the seller, guided by their agent, chooses an offer that doesn’t come together, the seller can lose precious market time and a second offer will often net a lesser price.
Keep in mind that “the real estate market” is always local. It differs from state-to-state, county-to-county, city-to-city and even neighborhood-to-neighborhood. This is why it is important to hire an agent who knows the current market conditions in the area where you want to buy.
What I’ve described here should tell you that most of Metropolitan Seattle is experiencing a seller’s market right now (again, this can change by neighborhood). If you are thinking of making a move, I will be happy to help you assess your options during a no-cost, no-pressure consultation.
Contact me today to help you plan for tomorrow.