The sharp drop in homes for sale poses a tough choice for buyers: Jump in now and compete with hordes of others or wait until inventory improves.
If you buy now, you might have to pay above asking. But if you wait, you could end up paying an even higher price and a higher interest rate if you need a loan. That’s because inventory won’t improve until prices rise enough to get more homeowners to sell and more builders to break ground.
The inventory shortage is especially acute in California. Of the 30 largest housing markets, the four with the biggest drops in homes listed for sale on Zillow in February compared with February of last year were Sacramento (48 percent), Los Angeles, San Francisco (41 percent) and San Diego.
Although listings are increasing on a month-to-month basis as the busy spring season gets under way, Trulia Chief Economist Jed Kolko predicts they won’t start rising on a year-over-year basis for a year or more.
The result is stories like this:
A 1,500-square-foot home on Clipper Street on San Mateo’s east side, advertised as a “heck of a wreck,” attracted 97 offers in the first eight days, says listing agent Claire Haggarty of NBT Realty Services.
The home was listed in mid-January at $375,000, which Haggarty considered “a little under market.” It sold for $510,000 in an all-cash deal with no inspections, no contingencies and a 10-day close.
At some point, prices will rise enough to shake lose more inventory, but it won’t happen immediately.
Based on what’s happening around the country, Kolko says inventory tightens fastest in the first 12 months after prices hit a bottom. “Everybody wants to buy at the bottom and nobody wants to sell at the bottom,” he says.
We saw a wild frenzy – and 20% appreciation – in 2003, and then it calmed down, even though we had the same no-doc loans available.
This version has picked up steam over the last six months, but we have a long ways to go, probably to summer 2014 before we see enough sellers come to market.
History may not repeat itself, but it often rhymes…
We lived in San Mateo/Belmont for 5 years right out of college from 98 – 2003. This story reads almost EXACTLY the same as when we were living there. Lots of all cash offers on beater homes with no contingencies or inspections. It was very common for homes to sell sight unseen. This part of San Mateo is AWFUL!! It is basically Foster City which means living right at Bay water level. When it rains, it is as bad as Mission Valley. Not to mention the stench on hot summer days from the brackish water. Oh, and the sewage treatment plant next door doesn’t help the scent either.
The lunacy in the housing market at the time is why the Mrs and I decided to move back to SoCal for the slower pace of life and more “affordable” homes.
So much for the affordable homes part…..
Total 180 from the price bottom in the 90’s. Inventory was there and nice properties sat for quite a while.
Both stock & housing markets are in their own world now.