Hat tip to Auntie Agent for sending this along, from the latimes.com:
The newest problem for the slowly improving housing market isn’t a shortage of serious buyers, it’s a shortage of good homes.
Would-be buyers are packing open houses and scrambling to make offers on properties before they are even listed. Bidding wars are erupting. And real estate agents are vying fiercely to represent the few sellers that do exist.
Housing inventory has sunk to levels not seen since the bubble years. The number of American homes with a “for sale” sign hit 2.5 million in April, the lowest number for an April since 2006, according to the National Assn. of Realtors.
David Dennick, who lives in Echo Park and works as a television editor, has been searching for a home with his wife, Denise, for about two months. The couple have already bid on three properties. They are hoping to find a home for less than $525,000, which is $25,000 more than they originally had hoped to spend.
“It is much more competitive than we thought,” said Dennick, standing in the entrance of an Eagle Rock open house on a recent Sunday. “It is just frustrating because we thought we would really be able to buy a house; we are a middle-class family.”
The sharp drop in inventory along with rock-bottom interest rates have helped stabilize even some of the hardest-hit markets, including the Southland, Las Vegas, Phoenix and Miami. Some real estate professionals are concerned that the lack of inventory might turn off potential buyers, stifling the recent recovery in home sales.
The much-predicted foreclosure wave that was expected to dump more homes onto the market has not materialized. Fewer borrowers are entering default, and banks are better managing the properties they do have on their books.
In addition, professional investors bankrolled by private equity firms and hedge funds are pouncing on bank-owned homes, often turning them into rentals.
A dearth of new construction also is constraining supply. In April — the most recent month for which figures are available — the number of completed new single-family homes available for sale stood at 46,000, the lowest level since the Census Bureau began keeping track in 1973. Some 70,000 were under construction, also near historic lows.
The inventory problem has been exacerbated by the plunge in home prices since the go-go years. Many people who bought at the top of the cycle are so deeply underwater, they can’t get the price they need to sell and are therefore not bothering to put their homes on the market.
“We know negative equity holds back home sales, but it also holds back the listing of sales,” said Sam Khater, an economist with CoreLogic, a company that tracks the mortgage market. “Today it is holding the market back.”
The lack of available homes is maddening for those consumers who thought 2012 would be the year to buy.
In Southern California, inventories have plunged over the last year. The number of homes listed for sale in April fell 35% in Los Angeles County and was down 42% in Orange, 39% in San Bernardino, 42% in Riverside, 53% in Ventura and 43% in San Diego counties, according to online brokerage Redfin.
The number of days a home sits on the market has also decreased, meaning properties are selling faster. For the entire six-county Southern California region, the median number of days a home sat on the market fell to 33 last April from 43 the same month a year earlier.
Eddie David and his wife, Tiana Rezac, have felt the unexpected shortage firsthand. The two were sure they would buy a house this year until they tripped into the perplexing new housing reality. After being outbid on three different properties in neighborhoods from the Westside to Atwater Village, they shelved the search.
“With the downturn, it seems like there are a lot of people who have been waiting in the wings to pounce, and because the rates are low, there is just a lot more competition,” David said. “There were multiple offers. We tried to get in on a couple other homes, and even though it had been just a week or two weeks, it was just too late.”
Alex Gruenberg and his wife, Kristina, both 27, lost out on a home that ended up going for $30,000 more than they offered. The recently married couple have new jobs in the area and are looking for a pedestrian-friendly neighborhood with decent dining options.
They are now trying to find homes before they are listed.
“We are really learning that there is sort of an inside element to that,” Gruenberg said. “Things are going in days.”
What are you seeing with regard to appraisals or buyers offering over appraised value, Jim?
From the article:
“Also important is having enough cash to make up the difference between the negotiated price and whatever the appraised value of the home turns out to be, he said. (Lenders won’t provide a mortgage for more than a home’s appraised value.) Many deals these days are falling apart because appraisals are coming in low, given how many recent comparable sales have been foreclosures or other distressed properties.
‘The appraisal is blowing up the deal half the time,’ he said.”
And this –
Drip… drip… drip…
“Phil Jones, a member of the California Assn. of Realtors’ Distressed Property Task Force, said that bankers who meet with the group “have a very systematic plan to distribute these homes on the market.”
Well, the way to beat this “SYSTEM” is not to bid or buy at all.
If the bank can hold up the inventory we can hold up our purchases.
I have a friend who bought a home, all cash, for the express purpose of parking his money there while he rented the property. All said and done, the rent he collects works out to about an 8% return on the money invested, which beats the heck out of what he’d get parking it in a bank, and/or their mutual fund plans. Even if the property had become significantly devalued, he’s STILL be doing better with it than the banks would provide.
I’d imagine hedge funders feel the same way, and with their deep pockets with ready cash, can stand in front of any average home buyer and get the sale.
Sure beats playing games in an incredibly dysfunctional stock market at the moment. Any hedge funder who wants to relax and have a nice day would be silly not to establish a REIT and start sucking up properties. As long as section 8 is going strong, it’s essentially a landlord’s market in middle-class, to low income areas, with government guaranteed rent checks in the mail.
Deadbeats need to be foreclosed on. It’s getting out of hand. Theres something wrong when people with money and jobs can’t buy a home.
I work western Sonoma County and last weeks tour had 7 homes on tour. One was both nice and well priced. Seven on tour the week before, two were nice ( one very nice horse property) and well priced. Well priced means 2000-2002 prices in nominal dollars. I do see multiple offers but few closing at over the asking price. There are good deals, just not many.
nc, why do you waste your time reading this blog?
‘The appraisal is blowing up the deal half the time,’ he said.”
This agent probably sells 1-2 houses per year, and had a problem on one of them this year.
The appraisers are given the sales price, and told to hit it.
I have had an occasional problem with an appraisal, but good agents find a way to make them work. Inexperienced, blathering idiots blow them up.
Remember that when you hire your listing agent – and you should hire me.
“have a very systematic plan to distribute these homes on the market.”
Phil, you are being toyed with, wake up.
I spoke with Alejandro, the author of this article, about a month ago.
He has quoted me before, and I told him I would always be available to talk. Even if he didn’t quote me, I told him that I am willing to verify the accuracy of what other realtors say.
But he doesn’t call, and neither do the rest of them. They want to use the drivel coming out of the mouths of bumbling agents, because it reads better than the truth.
Jim, by definition half of all agents are below average. I have never had a deal blow up because of an appraisal and doubt I ever will. I have my eye on a beautiful 24 acre parcel, 10 acres of meadow with a year round trout/steelhead stream. It fell out of escrow twice due to a relatively simple lot line/easement issue. That issue is clearly disclosed on the MLS but two buyers agents apparently did not read it. It’s the kind of problem that can be solved if both agents are competent and work together. The listing agent is good and the seller is motivated. The buyer’s agent just has to be willing to do a little work,what’s wrong with that?
Jim, was there an inventory problem at the very bottom of the last bottom? And if so, how bad was it compared to what we see now.
It was different around NSDCC in the mid-1990s because there was new tracts coming on line at a good clip – Aviara, La Costa Valley, Encinitas Ranch, etc. all provided dazzling inventory that was new and improved from the 1980s new homes, and dated 1970s style.
You could buy a new home in several spots around Carlsbad for low-$300,000s (SFT, Summerwalk and Sonata come to mind also) and they were snapped up quickly which put everyone on alert.
The new homes today aren’t plentiful enough to provide guidance, but apparently the pent-up demand is powerful enough to direct itself.
The internet is an amazing addition to the equation, and, coupled with the real estate infotainment reality shows, they are both fueling many to make DIY decisions.
The big stumbling block for us to buy is the combination of HOAs + MRs. Well, that and only having about 10% to put down in our price range, but I digress.
For example, take Bressi Ranch. Some homes may be priced correctly, but the combination of HOAs + MRs is in the $450 range. That is a lot of purchasing power in a low interest rate environment.
IMO, supressing the inventory is deliberate. Low inventory = high demand = higher prices. It’s working now, but I don’t believe this can continue indefinitely.
I have been looking for the homes “before they are listed” too!