I recently asked a Bay Area real estate agent about trends she’s observing in the current market. The first thing out of her mouth was the new need for her to understand buyer psychology as they learn the consequences of low housing inventory (fewer homes on the market than interested buyers).
No longer is it a simple matter of buyers figuring out how much money they have saved up and how much house they can thereby afford, doing a bit of shopping, and then closing on a home. Buyers must now often go through stages, an evolution driven by desperation as the weeks or months of shopping go on, and by experiencing flat-out “No” answers in response to their purchase offers.
The prospective homebuyer may start out telling the real estate agent, “I want a two-bedroom in this neighborhood and won’t pay a penny more than $X,” move on to saying, “Hmm, maybe we’d better bid higher given all the competition for this one-bedroom in a marginal neighborhood,” and end up at “Never mind the home inspection! Let’s double the asking price! We can’t wait any longer, we have to have that (tiny) house!”
This isn’t just a Bay Area phenomenon, either. The December projection from the National Association of Realtors says it all “Alas, Inventory Shortages Likely to Stay in 2016.” Relief isn’t reportedly in sight until the end of 2017, when Capital Economics researchers predict an inventory rise of around 50%.
According to economists at Zillow, this is even having an impact on the best time to sell a home. Zillow recently found that, nationally, homes that are put on the market in late spring (May 1 through May 15), sell around 18.5 days faster and for 1% more than the average listing. The explanation?
“The housing market today is heavily influenced by low inventory,” says Zillow chief economist Dr. Svenja Gudell. “Faced with increasingly competitive markets, many buyers are forced to consider several homes and make multiple offers, elongating the home shopping experience.”
That’s good news if you are a home seller just starting to think about putting your home on the market for this spring! Not only has time not yet run out, but you might be just in time to pick up on the desperate buyers who’ve been out there for weeks and who just want a home, at any price.