When you hear the term ‘perfect storm’, you think of major calamities and people dying. The C.A.R. used the term to describe why pending sales dropped in December:
Pending home sales in California plummeted in December, falling 25.2 percent because of what the California Association of Realtors® (C.A.R.) called “a perfect storm” of circumstances. The Realtor group said a shortage of homes for sale, rising interest rates and higher home prices sidelined many prospective buyers and drove pending sales down for the second straight month.
Theirs is a lazy analysis of the general market conditions.
The market is hot, and is being fueled by improved internet tools being deployed by homebuyers enabling them to act quickly when new listings hit the market.
As a result, the inventory of active (unsold) listings doesn’t grow. It won’t grow until more sellers over-price their homes – and the supply of unsold homes increases.
We’ve been hearing about low inventory for the last couple of years – but it hasn’t stopped sales from growing. Here are the annual NSDCC detached-home sales:
| Year | ||
| 2009 | ||
| 2010 | ||
| 2011 | ||
| 2012 | ||
| 2013 |
‘Shortage of homes for sale’ is not an accurate reason for why pendings are dropping. Buyers may not like the selection or pricing, but there are 726 NSDCC homes for sale.
The reason for pendings/sales to drop is because the prices are increasingly not right. The December decline might be a precursor to buyers digging in about price, or about the holidays.
We’ll see in the next two months!
From their article: (click here to read)
Hmm. A drop in November and December is sort of expected in a normal market, no? So, maybe we are back to ‘normal’. I’m thinking the perception of invenotry shortage will continute given the rise of ‘pre-sales’ and the fact that anything good (priced within shouting distance of reasonable) sells immediately (se, eg, the Solana house you highlighted). The days of having 5 houses that fit criteria that buyers could mull over for a while is gone, at least for now. I do think that lack of inventory still won’t move the OPT’s; Buyers have gotten wise to that. Even if they don’t know why it’s an OPT, if it sits, Buyers don’t want to play the fool. That is where I think the heels are allready dug in.
Yes, instead of five to consider, you might see 1-2 per month that might be close.
Part of it is pure pricing – it has gone up so fast that if a buyer’s cash, income, or qualifications haven’t followed, then the houses they look at each month get smaller and more inferior.
Yes, thanks to the OPT for making my case with motivated sellers. Thanks to OPT for letting the agents use their house to get more prospects! Lol!
My theory as to why there isn’t more inventory is that nobody wants to sell in a rising RE market. When people move up to a bigger house or relocate, they simply rent their place out instead of selling, hoping to bank the RE gains later. The rental market is strong right now, and management companies take care of the headaches for you.
Growing up in the 80s and 90s, when people upsized their house or moved out of town, they always sold their house. All the “Rich Dad, Poor Dad” books these days say never sell a house. Of 10 or so families I know who moved out of the inland empire or upsized, 8 have kept their old homes as rentals.
Until builders start really cranking out new houses (not happening in the IE), or the rental market collapses, I don’t see inventory levels changing.