It may be hard to believe, but the dramatic drawdown in inventories during this spring buying season is bringing some cries of “housing shortage” from hotter markets around the county. But is there solid evidence to support such a claim?
On Realtor.com, year-over-year inventories are down 21.48 percent through March. NAR reports first quarter inventories existing homes are down 21.8 percent nationally. At the end of the first quarter there were 2.37 million existing homes available for sale, a 41 percent decline since the summer of 2007 when inventories set a record of 4.04 million homes.
“We now have broad shortages of lower priced homes in much of the country, with very tight supply in Western states for homes through the middle price ranges. This is good news for many sellers who wish to list now, or for those waiting for prices to improve,” said Lawrence Yun, NAR’s chief economist last week.
Reports of multiple bids, price increases, slim pickings and discouraged buyers leaving the market are popping up in in a few markets, largely the nation’s hottest markets where inventory declines exceed the national averages but also major foreclosure centers like Phoenix where have been falling until recently. In others, unique local conditions such as the opening of factories or military facilities, natural gas booms in Pennsylvania and North Dakota, and seasonal shortages in university communities are causing market tightness.
In the Washington DC market, perennially one of the top ten nationally in price increases, evidence is strongest that the pendulum may be shifting towards a seller’s market for the first time in five years.
“Even though there’s a glut of homes throughout parts of the country, the Washington region seems to have the opposite problem, especially in the lower price ranges.
“Many of the outer suburbs still have plenty of houses in the lower price ranges. But less-expensive homes are very hard to find closer to central D.C.: 68 percent of homes offered for less than $350,000 are located in the outer suburbs beyond Montgomery County, Arlington and Alexandria. In the District, Redfin counts only 862 listings for less than $350,000,” reported the Washington Post May 4.
California markets like San Diego and Irvine where home building has been at a virtual standstill and is strictly controlled, population growth is creating new demand for housing.
“We’re going to grow by a million people, over that period of time. And that represents a demand of over a quarter million units of housing or more. And we have to supply them as an industry. What’s going to change is what we supply and where we build,” San Diego developer Gary London, president of the London Group Realty Advisers, recently told KPBS radio.
Most reports from Realtors reporting tight markets around the nation on the ActiveRain website focus on difficulties finding affordably priced, entry-level homes.
“Thinking of buying a home in Spring Lake (NJ) in the entry level pricepoint? Your choices are extremely limited this Spring season. Currently, there are only 6 active listings in this pricepoint,” reports Diane Glander of Diane Turton Realtors.
“This morning I was taking look at some of our local housing statistics. The first very noticeable thing is that the number of single family homes for sale in Palm Coast now stands 844. When I first began selling home in Palm Coast in 2007 there were over 3,000 home for sale. The current inventory of salt water canal homes in Palm Coast now stands at 89. This is down from 150 just two years ago,” reports Kendall Caputo of Real Living/ Palm West Home Realty.
“Inventory increasing at a pace roughly a month earlier than normal. We are seeing signs of a housing shortage with phone calls and emails from agents looking for specific criteria which are not found on the MLS. This is a phenomenon not seen since 2007. Extraordinarily encouraging,” reports Tim Moncrief of Austin.
“We are starting to see some real strong areas and price points in the hottest neighborhoods and areas of Atlanta - Buckhead, Sandy Spring and East Cobb real estate markets for 2012. All have been highly desirable areas for schools, area amenities and location. So, not surprising that Buckhead, Sandy Springs, East Cobb Real Estate would be the first to improve. Having said that, homes in these area run the full gamut of pricing and it’s at their lower price points - below 750k and below 1Million that we are seeing more of a recovery,” Michelle Francis, Buckhead Atlanta Homes for Sale & Lease.
Even Phoenix, where the Case-Shiller Home Price Index lost more than half its value from 2006 to 2010, is experiencing tighter conditions. Since January, Mike Orr, director of the Arizona State University Center for Real Estate Theory and Practice, has been predicting a housing shortage in the Phoenix market, especially in the crunch is expected to be more pronounced in the East Valley, where some subdivisions are approaching build-out and other builders are raising prices.
A growing demand and shrinking supply has driven home prices up in recent months, he said. Orr thinks that’s gone unnoticed to people who will enter the market this spring, in what is typically the peak time for sales activity.
In fact, in February the supply of houses for sale in Phoenix was down 42 percent compared to the year before. Some Realtors in Maricopa and Pinal counties are starting to call around to ask people whether they would consider selling homes in desirable neighborhoods. “Supply is tight, in a pretty extreme way, and it looks likely to stay that way for months, Orr told KPHO news in March.
“They’re going to be surprised that it’s so hard to buy a house. They’ve been hearing for so long that there’s a glut of homes,” Orr said. “They’ll go out and find there’s not a lot to choose from and every time they bid, there’ll be three or four other offers.”