Top Tips For Finding Your Dream Home - Even With Housing Inventory At All Time Lows
With housing inventory still at all time lows, we hear time and again from folks who want to buy a home but are having a tough time finding one that’s available to buy.
What exactly has happened with housing inventory?
When the bubble burst, inventory peaked at over 1.5 million homes with no takers back in October 2007. As recently as 2010 inventory was still increasing more than normal. But in 2011 and 2012 there were only small increases and then a sharp decline. However, year over year drops in inventory have slowed for each successive month in 2013. So we’re home shoppers are still feeling the effects of inventory declines, but it’s getting easier and easier to find a home, a trend that will likely continue because inventory most likely bottomed earlier this year.
What’s the current situation for someone looking to buyer a home today? Are there enough homes out there to choose from?
Housing inventory was up 5.6% last month. At this moment there are about 2.28 million existing homes for sale through MLS – in other words not including new home construction, FSBO and other homes that may not be officially listed for sale. That’s a 5.1 supply (As of 8/21 NAR Existing Home Sales). A normal market is a 6 month supply. The current level now has been pretty steady for the past few months, that’s good news for folks looking for a home.
Part of the reason is demand is down: Investor’s have been shutting buyers who can’t compete with their quick cash offers out of the market but are buying less now. Investor purchases peaked in February at about 22% and are now down to about 16% with a steady monthly trend now since investors were mostly interested in distressed homes they could flip or rent for a profit. As distressed inventory was absorbed (was 24% this time last year, now only about 15%), prices have risen and investors can’t get the same high return on their investments and are less interested.
And part of the reason is supply is coming from places is may not have been coming from before: Underwater sellers are coming out of being underwater and able to list and sell their homes. Sellers still underwater may list so they can sell before the Mortgage Debt Forgiveness Relief Act expires at the end of the year. New construction – though nowhere near former levels – is at least on the upswing again.
This will create better opportunities for first time buyers and move up buyers who typically depend on a first time buyer to purchase their home so that they can move up. The big challenge that will remain is going to be rising interest rates and loan costs and those new loan rules that kick in Jan 10 2014. Inventory shortage is the major concern for 58% of all buyers. But rising rates major concern for 56% of buyers who say rising rates is affecting their ability to buy a home. In fact a third are speeding up their search to beat higher rates.
What can someone looking to buy a home today do the better her chances of finding one she likes?
Inventory rates vary by location, property type and price range. You’ll have more to choose from and probably get more bang for your buck if you can go where the inventory numbers are higher and if you’re open to buying the types of home investors tend to steer clear of including homes that need work or homes in areas that don’t allow investors or rentals such as some of the gated communities – many let investors get away with renting before and are cracking down now. There are clear seasonal patterns for housing inventory. Again, while inventory varies from market to market, there’s generally less to choose from in fall and winter months and more to choose from in mid to late summer. Inventory normally decreases after the summer buying season (but this year we’ve seen the number of available homes actually increase – about 2.4% from July to August). Summer is also the traditional home buying season. Fall are typically slower months due in part to back to school.