This has made the news to some extent, but the level of housing supply continues to drop with no sign of letting up! At the same time, buyer demand has remained the same or increased.
As an example, let’s say you are looking for a single family home in Encinitas. You want at least three bedrooms and two bathrooms and can pay up to $700,000. Currently, there are 10 homes in the area to choose from. That may sound nice, but there are 15 that recently went into escrow and 15 are selling each month.
What does that mean for you in the hypothetical situation? That means that the existing inventory of 10 homes will either sell very quickly or are not desirable and that anything new that is attractive will draw multiple buyers competing for the same property. With inventory tightening each month this situation is continuing to escalate.
Here are two charts of the market starting in January of 2009 when the market first bottomed through today. The first is the overall market in San Diego County and the second is for all properties priced between $700,000-$900,000. I include the second chart so you can clearly see the seasonal increase and decrease in supply each year as well as the ongoing trends.
One major thing to note on the charts and level of supply: “Active” includes both Active and Contingent listings from the MLS. Contingent listings are considered an active status so I’ve included them, but they are listings with accepted offers awaiting an approval decision from a lien holder. If Contingent listings were removed the number of Active properties and current supply would be cut in half.
San Diego’s low supply of housing inventory keeps getting lower! The current supply of single family houses and condos in San Diego County is at its lowest level since 2005. Considering that sales volume is 20% higher than it was in 2005, we’re running into a real issue with available inventory. I’m starting to see an impact on pricing on the street level, but I’m not sure how it’ll look in the overall statistics.
Here are the numbers:
Current Supply: 7,233
Pending (last 30 days): 3,335
Supply (in Months): 2.17
Bank Owned and Short Sales Market Share:
Current Supply: 1,745 (24% of total)
Pending (last 30 days): 1,216 (36% of total)
Supply (in Months): 1.43
Last month Current Supply was 7,661 and Pending was 3,126 (2.45 Month’s Supply). Keep in mind that a balanced market has SIX Month’s Supply. Normally this would point to an extreme seller’s market, but this market is far from normal.
Here’s a professional photo of the kitchen from my previous post as it is now with the blue counters and dated cabinets. I think this looks better than it does in person.
When a house has green carpet, orange walls or strange discoloration on cabinets, counter tops or other surfaces there might just be a way to take photos that will allow buyers to see what it will look like without the blemishes and with no processing time.
Using “Sketch” mode in the Paper Camera App, I took this picture of a kitchen with dated cabinets and bright blue counter tops. This allows my buyers (who were able to see past the blue counters) to better envision what it will look like when the cabinets are refaced and the counter tops changed to a more modern look
Is this something I would use as a substitute for the actual photos? I haven’t decided yet.
Inventory continues to drop after coming off of the highs seen in 2009 and 2010. The graph below shows the trends for the luxury home market for the past three years. Current supply, including Active and Contingent listings, is more than 50% below the previous highs. Because of the high percentage of distressed properties on the market sales volume has dropped as well, reflecting a steady balance in supply and demand.
The overall market currently has five months of supply when including all Active and Contingent listings. Supply shows as just three and a half months if Contingent listings are ignored. A normal market should have a six month supply of homes.
Does this mean the market will turn around soon? With continued economic issues and financing challenges I don’t expect a significant improvement to happen overnight. I do expect outlook to slowly improve this year and for continued opportunities for those with the right strategy.