Prices and inventory, not quite a dead cat bounce.

When I look at the areas that are seeing rising home prices they share common characteristics. They are areas that appeal to the top 10% or 15% in income and they are all close to economic centers.

A little further from major economic centers I see prices staying pretty much stable despite a lack of inventory and efforts to prop up prices by the powers that be.

And I see new homes being built, because builders and those that lend to them see a profit to be made. This will lead to increased inventory and if it is the right kind of inventory for that particular market prices will stabilize or fall. That’s a pretty big if, Ryder homes is building in Sebastopol, it’s at the wrong price point and it’s the wrong style of home.

When, not if, someone builds a small development of single level bungalows here priced in the low to mid $600k level it’s going to have a large effect on prices. Real Estate is priced at the margin, when inventory picks up and one or two homes sell for a little less…

This time it IS different , it’s not a rising tide lifting all boats, the top 1% or 2% is doing better than it ever has, the top 5% is doing really well and the top 15%  is doing OK and looking for safety. And Real Estate looks a lot safer than Treasuries or the Stock Market to a lot of people. And you can leverage your Real Estate purchase with free money, 3.5% is less than inflation.

Builders will build whenever they can get the money to do so, I simply do not understand why they don’t build homes suitable for an aging populace. I could sell well built single level homes built for the elderly and handicapped all day long and they would sell for at least a 5% premium, nothing to sneeze at when you look at the bottom line. And while retrofitting a home is an expensive PITA, building a home with wider doorways and the rest doesn’t cost much more.

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Tom Stone

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About Tom Stone

I am a Broker Associate with Creative Property services (CPS) in Sebastopol Ca. My father was an Appraiser and expert witness based in Oakland Ca for many years and I grew up having the basics drilled into me. I enjoy what I do and I am good at it. I managed income property in Oakland for a number of years and was licensed to run a collection agency for more than a decade. I have also worked as a credit manager and as the senior collector at the test center of a Bank . I have been commenting for years at "Calculated Risk" and on other Real estate Blogs including the defunct "Sonoma Housing Bubble" Blog. The best job title I ever had was "Chief Garbler". My Email Address is "StoneForHomes@Gmail.com" and my cell # is (707) 364-2477, please don't call before 7 AM or after 8 PM unless we have a deal in progress.


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One thought on “Prices and inventory, not quite a dead cat bounce.

  1. Jay Wiedwald

    As further evidence that all real estate is local I offer the contrasting market of the Montierra Condominiums (http://www.bayarearealestatetrends.com/2013/01/small-condos-lead-the-way-in-a-slow-motion-market/) where the smaller units have increased in market value by 21% over that in 2011.

    The buyers are either investors or those who previously rented, have reasonably good credit and are employed. The one-bedroom units are going for $100k, which with current mortgage terms and rates comes out to about $470/mo in payments with little down payment. Add condo fees, property tax and Insurance and it’s still under $1000/mo, less than rent for an equivalent apartment.

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