In Texas and across the U.S. the real estate market has turned upside down. Now, instead of “everything” being for sale, hardly anything is available, especially for entry and mid-level home buyers. Our inventory is down 26% from the spring of 2012 – and 2012 was down from 2011.
We’ve suddenly flipped from a buyers’ market to a sellers’ market.
Nation-wide, February reports showed an average 4.7 months’ supply of homes for sale, and some markets are reporting as little as 30 days’ supply. Six months is considered a healthy balance.
What does this mean for the future? Is it a good sign, or a scary one? It depends on who you are.
Some are concerned about one of the reasons for the lack of supply. Large investors have been buying bank-owned properties in bulk directly from the banks. We heard of one subdivision in which 40% of the homes are now owned by one investment company and are being held as rentals. Agents fear a resulting erosion of home values as subdivisions become filled with “temporary” residents.
For buyers, the situation in some communities is almost grim. Anyone wanting to purchase a home is apt to enter a bidding war against several other buyers – some of whom are investors with cash in hand. It’s not unusual for a well-priced, properly presented home to receive multiple offers within hours of being presented to the market.
Buyers who haven’t awakened to the new reality are sorely disappointed when writing low offers and losing out on the homes they want. Real estate agents are working harder than ever, as even realistic buyers make attempt after attempt at home buying, only to be out-bid.
Sellers and future sellers are happy – as this situation is bound to push prices upward. In some communities, homes that were underwater are now at break-even or even back in an equity position.
But… as sale prices increase, there’s a hurdle to cross. Unless the buyer has cash, the house will have to appraise for the higher purchase price. And after being blamed for the last “bubble and bust” appraisers aren’t likely to let prices inflate too quickly. Thus, the increase is expected to be gradual.
Home builders are breathing a cautious sigh of relief. With a shortage of resale homes, their new homes are in demand.
However, building materials have gone up in price even as house prices have fallen back to 2002 and 2003 levels. Builders must be very careful and cost-conscious to avoid losing money on new home construction.
Is the shortage of homes for sale good or bad for the economy? It all depends on who you are.