What Today’s Low Inventory Real Estate Market Means For Home Buyers
By Kurt Real Estate Mar 18, 2021
By Emily Miller
Spring has officially arrived. We have moved the clocks forward and gained that extra hour of daylight, the spring wildflowers are beginning to bloom, and the long days of summer sun will soon beckon. In a typical year, this particular changing season would herald the start of a prosperous real estate period. For buyers and sellers, springtime is typically the best time of year to view properties, to pack up the old house and unpack in a new one, and generally to make a big lifestyle change. There’s a reason they call it “spring cleaning”.
Not so this year. After last year’s record lows, the real estate market still reflects extremely low inventories which will affect the real estate market this spring and for months to come. A typical year in the real estate market will see a normal annual inventory dip in January and then plateau in February, with an increase in inventory beginning the following month, in March. This year, for the first time in thirteen years, the local inventory has continued to decrease through the end of February.
So, what is a low inventory housing market and why are we experiencing one now?
In this article we will answer those questions and explore what this will mean for prospective home buyers.
What Does “Low Inventory” Mean?
At any given moment, the real estate inventory is in constant flux. The “inventory” referred to means the number of properties that are currently up for sale. So, a “low inventory” real estate market will signify that there are fewer listings currently up for sale. During a “low inventory” period, with less listings available, each prospective buyer will have fewer options to choose from, with more people likely to be pursuing the same listings.
In other words, a “low inventory” market means that the demand for housing options outweighs the supply. And the median real estate sale price point will reflect this shift. During a low inventory period, prospective buyers may be more desperate to purchase any property they can acquire, which gives sellers more power to determine their price. Each listing becomes a more precious commodity, in hot demand from a broader field of competition.
Why Is This Happening Now?
With a global pandemic taking over every industry in 2020, most homeowners were reluctant to sell, largely because of seller uncertainty. Making the choice to sell your home is a big decision. With rolling lockdowns keeping people cooped up inside, spending all their time working and playing remotely on the internet, many potential sellers balked at the idea of making that huge life transition now amidst so much chaos. Homeowners have been reluctant to give up what certainty they do have, which means that the real estate market has reflected almost unprecedented low levels of inventory.
Springtime is normally a bustling season for real estate in Costa Mesa. As people emerge from their winter quietude, there is usually a nice moderate inventory available and high demand. This means that spring is typically a good season for more successful and higher sales.
This year, as California continues to be affected by the ravages of the coronavirus pandemic, homeowners are staying put. This has led to an increase in average home prices of almost 11% since the same time last year; with single family homes now being listed for almost $975,000. For sellers, now is an ideal time to put their home on the market and take advantage of the higher price points that have risen in their favor. But prospective home buyers will have to reckon with the disadvantages of a seller’s market.
How Will It Affect Home Buyers?
Since the available inventory is drastically lower this year than in normal years around this time, prospective home buyers may run into frustration at several levels. With more home buyers expressing interest in less available listings, it can be tricky to make your bid stand out. Home sellers now have much greater negotiating power, as their listing has become a precious commodity amidst a field of higher demand.
Home buyers who express interest in the few properties that are currently available at their ideal price point may have to face intense competition from other interested buyers. Presenting an offer on multiple houses, only to be rejected in favor of buyers who offer a more attractive package for the seller, can be draining and stressful.
As a prospective home buyer shopping for new housing now, you should be prepared to make comprises, and negotiate with patience. Since this record-breaking low inventory period is very much a seller’s market, you will want to try to get a leg up on the competition by understanding the needs of your property seller better than any competitors.
If, for example, the property you desire has some kind of fundamental issue that you are willing to address in your own time- like an insect infestation or wood rot- you may be more likely to acquire the property if you offer to take it “as is”, without insisting that the seller fix the damages before turning it over to you. For a home seller who may want to move quickly and easily, this will make your offer stand out from among the competition.
Keep Your Calm Through Turbulent Times
This pattern is projected to continue for a while to come. With so few homes available- and existing home sales garnering record high prices- it will be important for prospective home buyers to continue to search with patience.
For homebuyers approaching this low inventory real estate market, try not to give in to desperation, and be persistent. Shop cleverly and consider all the options available for you. It’s a tough time for a homebuyer, but if you explore your options wisely you can weather the current storm.
Written by: Emily Miller
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