The Inventory Crunch: Will It Ever End?

22 Mar

Any potential buyer who has set foot through the doors of an open house will immediately recognize that something’s amiss: What are all these people doing here?

That flood of buyers walking through the door is a symptom of an ongoing housing inventory shortage.

Inventory is down. And by “down,” I mean “seriously and insanely off balance.”

The result? Massive bidding wars. Prices spiraling upward. And there’s no end in sight. This is great news for sellers. Definitely not so much for buyers.

When will the current inventory crunch end?

It’s hard to say, of course. But when prices are heading downward, many sellers rush to unload their properties before prices fall even further. Once sellers sense that the bottom has hit, many of them will sit and wait for prices to increase further before they sell. As prices climb, more sellers will list–and eventually inventory (and prices) will re-stabilize.

The result? Nobody’s listing their properties today.

As of this week, available housing inventory in Los Angeles was down by nearly 50% compared to a year ago, and is a whopping 70% below the inventory peak in November 2007.

Meanwhile, prices are going up and up and up. Check out these statshots from the Department of Numbers:


And, just to show that this is consistent throughout other parts of Southern California, here’s how things are looking in Orange County:


Look at that. Asking prices are up more than 30% in L.A. and O.C. in the past year alone

One piece of positive news is that inventory has been slowly but surely ticking upward since the beginning of the year. But buyers are still coming out in droves. Why? With 1) improving consumer confidence, 2) interest rates that are likely to stay historically low for the foreseeable future, and 3) sufficient time having passed so that former homeowners who lost previous homes to foreclosure can qualify for new mortgage loans, many buyers are still seeing now as a good time to purchase.

Bottom line:

Buyers–Allow plenty of time to search. And expect to have substantial competition for any home you’re considering buying. Expect that you will lose out on a few properties before you find an offer that sticks.

Sellers–This really is the best seller’s market in a half-dozen years. If you’re thinking of selling, consider that you’ll be able sell quickly and command top dollar (not to mention other lucrative terms) for your home.

If you’re considering a home purchase or sale, feel free to contact me and let’s talk.

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