Updated: Mar 1
HOMES FOR SALE? WHAT HOMES FOR SALE? WHERE????
The Spring homebuying season should have just started here in the Bay Area, with homes for sale pouring on the market, builders showcasing their “Model Homes”, and buyers happily moving into a home of their own. Not so much in 2021.
Nationwide stats show the inventory of homes for sale is about 50% of what it was this time last year.
Buyers are applying for pre-approvals in droves, and are desperate to get appointments to view the few homes on the market. With mortgage rates in the high 2% -low 3% range, it seems that everyone now wants to be a homeowner.
Potential buyers are making offer after offer, only to find out that 5, 10, 20 or in one case, 81 (!!!) offers were submitted on the same home. The competition is insane. The market is so hot that a cash offer won’t guarantee a discounted price. In fact, so far this year, of 96 cash offers accepted on homes in Central & East Contra Costa County, the accepted price averaged $40,000 HIGHER than the asking price.
Many homes are sold to “pre-emptive” buyers, who submit strong offers (over asking price, large down payment or all cash, waiving appraisal and inspection contingencies) which give the seller a short time to respond. Some sellers happily accept, relieved of having 40, 60, 80 groups of buyers traipsing through during the showing period.
WHY is the Market Like This ?
A number of factors are converging, many directly related to the pandemic. Essentially, “Supply & Demand” rules the day. Lots of demand, little supply.
- Sellers are waiting until they feel safer (widespread vaccinations, herd immunity, travel restrictions lifted) if they have no compelling reason to "sell right now"
- Forbearance programs - are keeping distressed properties (foreclosures & short sales) off the market
- Older sellers, who, in years past, would have moved into assisted living, are staying put as long as possible.
- New home builders are dealing with supply chain issues obtaining materials, and higher costs. Lumber prices are up. Health regulations impact the number of workers in close quarters, slowing down completion time.
- Super Low interest rates – created a buyer frenzy for "cheap money"
- Working from Home allows buyers freedom from commuting – as long as the home has good broadband access.
- More space – apartment and condo dwellers are looking for extra room, inside and out. Highrise living, especially, has lost a lot of luster.
- Demographics -- the "Baby Boomlet" of the 1980's (today's "millenials") are in their 30's -- prime age to settle down, start a family, and buy a home.
- No place to go – theme parks, movie theaters, live sports, concerts, museums, tourist attractions, etc. are all closed or severely limiting attendance. School and youth sports are mostly shut down. Where a big yard was considered a burden just a couple of years ago, now it’s a coveted treasure.
What Needs to Change?
· Builders must ramp up building of new homes – which means that cities must streamline the approval process, and the "NIMBY" effect mitigated
· “Shots in Arms” – By summer, vaccinations will be widespread, building “herd immunity” . Many sellers may feel safe enough to list their homes.
· Interest rates will rise a bit, and will quell demand, say many economic pundits
· Easing travel restrictions – sellers who would like to move out of the area, or out of state, must feel comfortable doing so. Can they safely, and conveniently, travel to find a home in a new location?
· Faith in government – there's a light at the end of the tunnel, the economy won’t likely be shut down again. Adding, removing and adding restrictions again doesn't give a sense of confidence.
When will we have more inventory, and more of a "normal" market? Very possibly starting mid to late summer 2021. Let's cross our fingers!
Here’s a link to an excellent article, “Where Have All the Houses Gone?” from the New York Times.