Declining Housing Inventory Set To Delay Housing Recovery
The housing market is going to experience a delay in its recovery because there simply aren’t enough homes for sale.
I did some research using Infosparks in our Multiple Listing Service and found that in the City of Yorba Linda, CA, new listings in the month of January have decreased 64% from the peak in 2020.
New Listings in January:
2020 = 100
2021 = 99
2022 = 62
2023 = 36
With only 36 new homes going on the market compared to 100 new listings back in January 2020, the housing numbers will simply not compare to when it was a hot housing market.
IMPACT Properties did two housing forecast meetings and in the presentation it was stated that the only people selling right now are the ones that “have to” sell. The reasons that force people to sell are typically issues related to declining health, death, job relocation or financial distress from a job loss, and finally family related events such as marriage, births, and divorces.
We are no longer seeing the sellers who want to simply “move up” or “move down” because the housing inventory has been declining. After talking with hundreds of clients over the last year, I can’t tell you how many times I’ve heard the words, “I’m not giving up my interest rate.” And therein lies what I believe to be the number one reason most people are not selling if they don’t have to; they have a great interest rate on their property and refuse to give it up.
My wife and I are in the same position so I can speak on behalf of my own reasons for not selling. The main reason we aren’t considering it is that we have an amazing interest rate after refinancing back in 2021 when rates were at a pandemicly driven artificially low rate. We refinanced into a low rate on a 20 year mortgage and have hopes of paying it off now. In addition, our payment is still lower than if we were to rent our own home. I know many who are in the same stage we are in.
What does this mean for homeowners? Well for one thing, many are simply going to stay put, even as home prices adjust downward to accommodate the higher mortgage interest rates. Because most people have equity and don’t need to sell, they won’t.
With a decrease in supply, home prices will eventually stabilize because we still have buyers willing to buy. Of course we don’t have nearly as many buyers as we used to but even if we did, we wouldn’t have enough homes for them.
Buyers who are waiting for the market to shift downward even further may be surprised to find that it’s not going to be a bloodbath like 2008. Because we don’t have the massive volumes of homes for sale caused by bank repos and short sales prices are bolstered like a buoy on the water. They will go up and down, but they will not sink very far.
As I wrote about in a Bald Brothers Team article, we had multiple offers and buyers literally competing to get their offer in on one of our Probate Listings. There are not a lot of homes for sale in this neighborhood in Torrance, CA and as of today, we received 16 offers on this home, driving the price up over the listing price. Buyers hoping to get a “good deal” on this home faced stiff competition and a good deal was not an option.
A delayed recovery of the market is probable because we don’t see mortgage rates dropping anytime soon. Once mortgage rates come back down, homeowners with low fixed mortgage interest rates will eventually voluntarily sell their homes as the gap between their current rate and the rate they are offered on a replacement home are closer together. When that happens, there will be more homes for sale and more closings. Increased closings will symbolize a recovering market.
Until that happens, we will continue the slow pace we are at now with the declining housing inventory.
If you or a loved one is in a situation where you are forced to sell, the professional real estate agents at IMPACT Properties can help you through the process. We understand that situations like that are difficult and we handle each situation with honor, dignity, and privacy. Don’t delay getting the help you need.