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This is the question on everyone’s mind right now. Rather than write another post about it, I think it’s a great topic to kickstart our new Q&A section.
As you can see from the attached chart, the inventory of homes for sale in the Bay Area continues to collapse. Last year, we saw no “Spring Bump” of new listings. And this year we are starting out with even lower numbers.
So when will things get better? First we’ve got to understand why so few homeowners are deciding to sell their homes, then we can theorize about when they will change their minds.
I believe that it’s partially from negative equity, but we have had a lot of that for the last six years. I think the real issue is that prices are finally going up and Sellers want to ride it out as long as they can.
I wish I could say for sure what’s happening and why because this is the single biggest force driving our housing market right now.
What are your thoughts? When and why do you think more homeowners will decide to list their homes?
Tom StoneI don’t have a clue. I do know that although the economic situation has stabilized to a degree real wages have not gone up and that interest rates are at a historic low. Where are the drivers for higher prices? There is a pool of buyers out there, but they are much better informed than in the past and there is a degree of ” Survivor’s bias” among them, they are on the whole more prudent than buyers were 8 years ago. I learned a long time ago to take the money and run, any profit is a good profit and being greedy can be costly.
Yeah. I’ve got to think that there are a lot of Sellers who were unable to sell, but now they can. What’s the saying? Never sniff a gift fish?
JosephMy family has a budget of $650k for a house in SF with a down payment of nearly 40%. We have been looking for 6 months. So far, nothing.
Reasons why prices are high:
-Government pours $40 billion/month into real-estate and lowers interest rates artificially.
-Investors see this as an opportunity to buy so they use cash to purchase homes
-Investors can either sell the homes for a profit or rent the homes out for some profit
-Shadow inventory continues to decline because the government is helping the people that purchased in the bubble forgive debt
-Banks are not releasing foreclosures fast enough. They are allowing squatters to live for free.
-Interest rates are low enough and rents are high enough to cause renters to want to buyAll this will not last. The government is creating a bubble again. The government and the media wants to call this a “housing recovery”. Recovery to what? 2007 level prices? Is that what they want? A recovery to bubble prices?
What happens to housing prices when interest rates will have to rise? What if interest rates go back up to 5%?
If I buy a house right now by overpaying and overbidding and the interest rate is 3.5%, my house will be underwater in value when interest rates go back up to 5%.
That’s why I’m holding out right now(besides nothing to buy). I don’t want to be underwater. This is a bubble. This cannot last.
” The government and the media wants to call this a “housing recovery”. Recovery to what? 2007 level prices? Is that what they want? A recovery to bubble prices?”
Yeah… people use the phrase “housing recovery” a lot and it can mean a lot of different things. I think a return of bubble prices would be an absolute disaster.
Pricing in desirable parts of SF, the Peninsula, and Silicon Valley is at all-time high. Let me repeat that: ALL TIME HIGH. As far as they’re concerned, the bubble HAS returned. It just takes longer to spread out to where it isn’t so Special.
Tom StoneMadhaus, I don’t think it can spread much further. The money and the credit aren’t there. I work in Sebastopol, price a place $1 too high and no offers. Price $1 below market (under $1MM) and you will have at least a half dozen offers right away. And prices don’t seem to be rising from what I can tell.
The East Bay is officially skyrocketing again. We aren’t back to bubble highs but we will be soon if inventory doesn’t normalize.
June HalperinPotential sellers look and see there is no (nice) inventory at reasonable prices, and decide to stay. There are no move-up buyers. They just went through the hassle of a refi, maybe even 2 or 3 times, and have emotionally committed to where they are. The buyers of the last decade now all have kids in school and no one wants to change schools.
However, in the next 10-20 years 80 million baby boomers will be moving to retirement homes or the less enviable outcome. That’s the next housing inventory boom. You just have to have the long view.
“There are no move-up buyers.”
That’s a big part of what’s missing. Move-up buyers also put more homes up for sale.
Just did a follow-up blog post.. Don’t expect things to get better soon. http://www.bayarearealestatetrends.com/2013/01/redfin-dont-expect-the-inventory-of-homes-for-sale-to-rise-anytime-soon/
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