By Mike Bodeen · 30 October 2017
Low Inventory Continues to Haunt Local Homebuyers
USA Today had an article yesterday describing why it’s so hard to find a house to buy – as in just slightly easier than finding the proverbial needle in a haystack. It was interesting to note that they were using national stats from the National Association of Realtors which stated that the nation’s housing supply was running at a 20 year low of 4.2 months. The supply number is the time it takes sell an area’s supply of homes for sale with no other homes coming on the market.
If the nation’s current supply of homes for sale is 4.2 months and that is the “haystack” of supply, what would we call Phoenix’ 2.2 months of supply? I call that a serious problem.
Four reasons were listed by the USA Today article that included:
1. Two Shortages: Construction workers and space for new lots
2. Real Estate investors keep renting properties father than selling
3. Fears of Capital Gains taxes on pricier homes
4. Rising borrower costs
Construction workers and space for new lots is indeed a problem in the valley regarding new home construction. Demand in land is sending land prices higher in value, which of course is passed on to the consumer. Valley builders have wised up in the past ten years to better gauge the economic ability of our available buyer pool and is thus far resisting overbuilding. Housing experts claim that we are in need of tens of thousands of new home units now. This problem becomes exacerbated by recent hurricanes in Texas and Florida, plus California wild fires that have destroyed thousands of homes. These huge needs will syphon off construction workers from the rest of the nation (including Phoenix) and will be paying wages unheard of compared with even a month ago.
Corporate investors did indeed purchase heavily in the Phoenix Metro home market. This enabled us to climb out of our devastated market 7-8 years ago. Many experts predicted that these large companies would then turn around after several years and “dump” thousands of homes on the market. This has not happened, as these newly created rentals have not only been increasing in value, but their rental prices continue rising as well.
The last two reasons cited in the article, fears of capital gains and rising borrower costs have not panned out for our community.
But we are still experiencing demand from buyers coming off the foreclosure and short sale sideline who are now eligible to buy homes, as well as millennials joining the search for that elusive needle in — two haystacks!
Chart: http://www.cromfordreport.com/member-only/tableau/days-inventory-no-UCB.html
Market data referenced in this article comes from The Cromford Report.