Explaining The Low Housing Inventory In Ventura County
- Written by Mana Tulberg
- Posted January 6, 2010 at 2:49 pm
“Could someone please give me a good explanation for the low housing inventory?”
Recently I posted the above question on both Facebook and Twitter. The responses I received were varied and insightful. I was informed that the low housing inventory is not exclusive to just Ventura County, rather the whole country is experiencing this frustrating situation. The scarce selection of homes has left many Realtors and their clients disappointed. This has generated an aggressive housing market.
Some of the home buyers in Ventura County have lost the excitement of home shopping. The low inventory of homes in every city of our county has caused a bidding war on many properties. Homes that are priced well receive multiple offers within the first couple of days of being on the market. In my recent experience, many of these homes sell 3-5% over the asking price. Cash buyers, and home buyers with 10-20% downpayment, have a strong advantage of being much more likely to have have their offers accepted. This leaves FHA home buyers probing and watching the housing market more vigorously, but that is another post by itself.
Back to the question at hand: What is the reason for the low housing inventory in Ventura County?
The majority of the responses that I received agreed that, no matter the market condition, the inventory of homes normally declines during the holiday seasons. Starting in October, both home sellers and home buyers tend to pause their home selling or home buying activities. However, I believe there are more explanations for the decrease in Ventura County’s housing inventory than just the normal seasonal slow down. The rapidly increasing rate of unemployment and the compelling rise in shadow inventory of foreclosed homes may provide a better explanation for the low housing inventory in Ventura County and the rest of the country.
Teresa Boardman, an amazing photographer and Realtor from Saint Paul Minnesota, brought up a great point during our Facebook discussion. Teresa and I both know some homeowners who refuse to place their home on the market in order to purchase a newer or larger home due to job insecurity. The current economy and the rise in unemployment has left many homeowners cautious and uncertain about their future. A newer or larger home usually means a larger mortgage and an increase in property taxes.
Another great colleague of mine, Irina Netchaev of Pasadena CA, pointed out the so called, “shadow inventory” of properties. These properties are homes that have been taken back by the lender or homes where the home owner is 90 days behind on the mortgage. According to a report published in September 2009 by First American CoreLogic 1.7 million homes are currently in shadow inventory across the US. The overwhelming number of foreclosures have delayed the lenders in processing these homes for sale therefore delaying the entry of these foreclosed homes into the local markets. It is unclear when and how the lenders will unleash their inventory of foreclosed homes. However, there are some that argue lenders are holding on to their foreclosure inventory until the housing market stabilizes.
I am very interested to read your intake on this matter so please feel free to leave your thoughts and opinion in the comment area provided for you below.
Happy New Year Mana!! interesting post. Would you recommended putting house up for sale now or waiting until March or April, with the hope of a bounce in the market? Also is there a low inventory on all types of homes or is one sector better?
Hi Andrew,
Thank you. The market entry for any given property depends not just on the overall inventory but also on that properties listing price. However, considering the home price factors such as shadow inventory, unemployment, etc I would recommend putting a house on the market now because currently it is very difficult to predict which way the real estate market is heading.
The low-moderate priced homes are the properties that are currently selling faster and are having low inventories.
Many homeowners who are upside-down or “at parity” cannot do anything with their current home until the loan-to-value ratio changes. They have no equity, and no cash for a down-payment on a potential move.
Second, loan modification is virtually Not Possible for those owners who are employed and can otherwise be considered as “able to afford” their current mortgage terms and payments. Owners in this category are literally “locked-in” to their current homes until either the value increases or they can re-finance. Neither of which is likely for what could be years.
Third, a significant, yet unmeasurable, population of owners would like to take advantage of available or potentially available distressed property, but cannot, due to their current ownership circumstances. Also, the Rules of the Game have changed relative to qualifying for Jumbo & non-conforming loans. You can’t just go out and “get a loan” the way you used to be able to.
All of these factors, when taken as a whole, create a system that has now come to a halt. It will take months, and years, for things to loosen-up again.
One final aspect, which you mentioned briefly, is “Fear.” While retirement investments may have stabilized and recovered somewhat, everyone knows that we are just one “event” away from another financial crisis or collapse. Whatever and whenever that might be could send the rabbits scurrying for their holes, with fortunes and jobs going underground with them.
We are not out of the woods by any means, but we are deep, deep in the middle of the forest. It’s a long walk out, and that path is a treacherous one.
Mana,
Berkeley, and the surrounding communities of Albany, Kensington and the Rockridge neighborhood of Oakland are sharing the problem of low inventory, and have all year. In addition to the conditions you described so well in your post, I believe there are many sellers who read the national, or even state-wide news about a “glut of inventory” and sluggish sales in many areas, and become frightened of placing their property on the market. Much of the general news has been that the real estate market is in the doldrums, with price declines. If sellers do not take the time to consult with a local expert REALTOR, who can inform them of the conditions in their micro-market, they may be harboring very false impressions.
In Berkeley we’ve become accustomed to overbidding, and except for a few months in early 2009, overbidding has continued to be a common occurrence. This is so much the case that in Nov., and Dec. 2008, and Jan. 2009 the median sold price was higher than the median list price in Berkeley. That was also the case in three out of the past five months of 2009.
It is true that on average, prices have dropped about 12% within the past year, but within those averages are a small percentage of distressed properties. With low inventory, those properties can pull down the averages and give the impression of a market that is less robust than what we as agents are experiencing.
My buyer clients in Berkeley must be prepared for overbidding more in the range of 10% over list, depending on the number of offers. My last buyer of the year needed to pay almost 20% over list when competing against three other buyers, one of them all cash, and this in the $1M range. A client buying a foreclosure had to do the same, at a lower price point but competing against 16 other buyers.
So if we had to explain in one word why there is low inventory, I would use the word fear. Fear on the part of the sellers that their financial situations could change, fear that the buyers’ situations could be shaky and a sale might not go through, and fear that when it’s time for them to be a buyer, they’ll find it difficult to acquire the home they want. But at least in our area, if the sellers have the courage to bring their home on the market, and price and prepare it following the advice of their REALTOR, the odds are excellent that it will sell, and command a fine price.
I look forward to hearing about the experiences of other agents in different areas. Happy New Year!
Mana,
I’m in wholehearted agreement with Arlene’s assertation that the national news is, in part, driving this. I know many people are actually choosing to lease their homes out when forced to move. When you ask them why overwhelmingly you get the answer “well, I know it’s a terrible time to sell”. This despite the fact that interest rates may be rising soon and mortgage guidelines tightening.
I had some clients that decided they were done with the hassles of having an empty home and the first words out of his mouth when we met were “I know it’s a terrible time to sell”. The property was placed on the market that week after a few I sent maintenance crews in there and had multiple offers within 1 day of listing. It sold for $5000 above list price.
There may be nothing we can do about people that are wanting to stay where they are for fear of losing their jobs or a cutback in hours or wages, but I think it’s time that we start influencing the national news to not emphasis the doom and gloom and start actually reporting the news that housing is, for the most part, doing very well.
You are definately doing your part! Happy New Year!!!
Mana, thanks for the mention! In Pasadena, we also see sellers that put their homes on the market only if they have to, i.e. relocation, equity needs to be pulled out for whatever reasons or distress. As your commenters mentioned there’s a lot of fear out there for both the sellers and buyers.
If you are a seller, why would you sell unless you had to in this market?
If you are a buyer, what a great opportunity to get into a property with lower prices and ridiculously low interest rates.
The big unknown is the “shadow foreclosure inventory”. We know it’s out there, we just don’t know when these homes will hit the market and how quickly.
In Pasadena, we have around 450 active listings, but over 200 homes and condos are scheduled for auction between January and February. That’s 50% or so of existing inventory.
The problem is that the auctions can be delayed and then the banks take their sweet ol’ time getting these homes listed… so timing the release of these foreclosures is difficult. However, we know they’re there.
Great post and great answers. Now… we do what we always do – track the market and advise our clients as best as we can.