Where Are All The Homes For Buyers To Choose From?!
March 6, 2009 by Danilo Bogdanovic
Filed under Buyer Resources
A few weeks ago, I wrote a post entitled, “Loudoun is a seller’s market? Are you crazy?!” in which I discussed the current market conditions in Loudoun County - low inventory and high buyer demand – and how the amount of supply versus demand technically made it a seller’s market.
What’s happened since then? Check out February’s supply and demand figures to see for yourself:
- February 2009 had an almost 50% increase in buyer demand as compared to February 2008
- February 2009 saw a 33% decrease in new listings coming on the market as compared to February 2008
To put it in further perspective for you, here’s an email I received a few days ago from a buyer I’m currently working with…
How cyclical is inventory from a month to month basis? I know Spring tends to be a bit busier, but even within the past 6 weeks I’ve noticed the inventory of homes that fall within our sphere of interest dwindling quite a bit. 6 weeks ago there might have been 10 homes, now its 1-3. Is that sort of a normal ebb and flow or is it more indicative of a whole bunch of people like me all jumping back in the pool at once?
This buyer is not the only one feeling this way. I’ve had several other buyers experss the same concern and frustration over the past two months.
Why are there no homes for buyers to choose from?
People were holding off on buying for most of the 4th quarter mainly due to the bad financial and economic news, the election, holidays, etc. Once things settled down and news of the winner of the election, the stimulus plan was announced, etc., people started jumping off the fence. In addition, as market values dropped, fewer homeowners could afford to sell. Many homeowners are stuck in their homes until they come up with the cash to sell or refinance or until some mortgage/refi help comes their way via the governement/stimulus bill.
Will there be more homes to choose from over the next few months?
Personally, I think the next few months will be the busiest for buyers and buyer’s agents since the previous crazy market of 2003 to 2005. Currently, buyer demand is increasing at a higher rate than new listings coming on the market. If the rate of inventory doesn’t increase to keep up with buyer demand, it’ll only get tougher for buyers because they’ll have even fewer homes to choose from.
Sherif on Fri, 6th Mar 2009 11:46 am
Danilo, I know it is hard to see a bird eyes view for the current housing problem from a realtor’s eye view.
Plse read the following comment:
Banks in Crisis: we are going to incur an enormous and unprecedented loss in property values. We have already far surpassed the great depression in property value loss (measured as a percentage of the peak value). We appear to be at an early stage.
In a typical bank crisis, property values fall for six years. We are now 2.5 years into this crisis. Let history be the guide and assume we are half way through the depression. And take great and determined notice of the frightening velocity of our property-value losses. Case-Shiller reports an 18% loss nationwide in 12 months based on comparing sale prices from September 2007 and September 2008 (released Nov 25, 2008).
Obviously the future is unknowable, but there can be reason in history, and the patterns suggest an answer. Better to follow the logic of the pattern than the prejudice and ignorance which guide almost all of us most of the time and in most matters.
The meaning of the pattern is simple.
Painting with a broad brush, assume a 40% loss in property values throughout the entire United States in a period ending in 2010 or 2011. This means eight trillion dollars of equity disappears. That’s a boatload of money to take away from somebody, but turns to catastrophe when you recognize borrowed money purchased this loss.
Assume mortgages of half of the eight trillion disappear. So four trillion dollars of mortgages burn and go away and are never paid and are a complete loss and write off.
This means the banks and other mortgage owners are bankrupt to the tune of $4 trillion dollars. So the owners of the mortgages need $4 trillion dollars of new capital to get back to square one.
The Treasury has thus far given away about $250 billion to commercial banks. I don’t know how much private-source new capital banks have raised during 2008. If it is a trillion dollars I would be shocked.
In any case, we are so far away from having raised $4 trillion of new capital for the banking industry that you must run your finances based upon the assumption that zombies are running the economy. Because if zombies are running the economy then zombies are running the economy. Putting $250 billion into a $4 trillion problem is not taking half measures, it is using a squirt gun on a burning home.
Take these practical steps to protect yourself.
Don’t buy real estate: Avoid buying real estate unless you drive an exceptional bargain and have a minimum ownership period of five years.
Sell real estate: If you are waiting for prices to improve, you may have to wait five or ten years. Assume the price of your home will fall 25% from its value today. Then make the decision of whether or not you should sell today: Do you want to own your home in two years when it is worth 25% less than it is worth today?
Sell stocks: Take all money out of equities unless you treat your stock investments like your budget for gambling and don’t care about losing it. Put your cash in dumb dull places like savings accounts and money markets. Avoid treasuries – the smartest investment by far last year, but far too popular to be stable.
Work hard. Pray for good things for your family and your country and the world. Pray that zombies may be enlightened. We do have a way out. It’s expensive, but smart. You will know the zombies are enlightened when they enact Plan Orange.
Danilo Bogdanovic on Fri, 6th Mar 2009 12:04 pm
Sherif – It’s not hard for me to see the truth and reality because I don’t look at it from any particular point of view. Being a Realtor doesn’t skew my point of view nor does it cloud my vision or thinking.
For someone to use the word “depression” shows me that they have absolutely no idea what they’re talking about. We are not in a depression – we’re in a recession – a huge difference. What people are going through now is not even close to a depression like the one in the 30′s.
Secondly, unlike the commenter’s take that it will happen by 2010 or 2011, property values in this area have already dropped 40%, if not more. The DC metro area market values have corrected to 2003 prices and some areas are at pre-2000 price points.
One of the few good things that person wrote was that you should buy real estate only if you’ll live there for at least 5 years. In this situation, I’d go even further and say at least 7, if not 10 years just to be safe. But that’s not really “smart” because that’s common sense and is the mentality that all buyers should have regardless of what type of market it is – real estate is 1) a home to live in and 2) a long term investment.
If you wish to listen to people who don’t know what they’re talking about, are eternal pessimists and talk about “zombies”, go right ahead. I’ll stick with the facts and reality.
Sherif on Fri, 6th Mar 2009 12:30 pm
Danilo- There is an old joke among economists that states: A recession is when your neighbor loses his job.A depression is when you lose your job.
The difference between the two terms is not very well understood for one simple reason: There is not a universally agreed upon definition. If you ask 100 different economists to define the terms recession and depression, you would get at least 100 different answers. But no body can really tell if we are going through a depression or not. We hope the economy recover sooner than later…..
Bug Vonda on Tue, 10th Mar 2009 11:05 am
Great post, Danilo! I too am experiencing a shortage of homes in certain price ranges in my area. Another negative is the homes on the market that need too much work, many of them are short sales/foreclosures and the owners did not keep them market ready, yet they want bailed out. We are experiencing about a 6% drop in prices according to our local mls statistics.
In 1938 the unemployment rate was 19.1%, last Fridays radio news has current unemployment at 8.1% 92% of the workforce is still employeed!!! This recession does not compare to that depression!
First time homebuyers make up 41% of the purchaser’s in this country and the new tax credit will only help keep this percentage up.
This is a strange market, but NOT dead. People are scared but they are willing. We, realtors and other professionals, need to get the positive news out onto the street. The media and government tells us “no” we can’t, but I know the American people can. Keep spreading the GOOD NEWS!! The “people” will fix this economy!
Danilo Bogdanovic on Wed, 11th Mar 2009 2:39 pm
Thanks Bug Vonda, Yes, the news stories are mostly bleak (and often times embelished or out of context). But at least there’s some good news around these parts…hopefully, that continues.
I agree that we need to spread the word about the good news when there is good news. But it’s our job to relay the truth – regardless of whether it’s good or bad.
Unfortunately, NAR’s “Now’s a good time to buy” and “the bottom is here” slogans from 2006, 2007 and 2008 have made all of us look like lying #$%&!. Many, including msyelf, don’t subscribe to such philosophy nor tactics yet, we face an uphill battle daily thanks to such comments/slogans that are made by the very organization we belong to that is supposed to be helping us. But that’s a post for a another day…