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Regular Contributor
TheGreenBanker
Posts: 86
Registered: ‎12-11-2011
0

Low inventory

Can someone explain to me why there is such a low inventory for home in the BA right now.  Even areas like Daly City, there are very few homes on the market.  What are your theories for this?

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011

Re: Low inventory

  Welcome to the forum. Grab a chair and sit on the ground:smileyvery-happy:.......Please, read, the forum is full of topics and the low inventory is in most of them.  It's so low that most of us are going to act like the bear, get into a hibernation process and wake up when everything is all "smell the roses". :smileyvery-happy:

Silver Super Contributor
ptiemann
Posts: 1,210
Registered: ‎08-07-2009
0

Re: Low inventory


TheGreenBanker wrote:

Can someone explain to me why there is such a low inventory for home in the BA right now.  Even areas like Daly City, there are very few homes on the market.  What are your theories for this?


very simple.. owners who could sell are waiting for higher prices. Prices have just begun to increase. The up cycle has historically always been how many years.. 5? 7? I'm too lazy to check.

Gold Regular Contributor
sheriff
Posts: 2,291
Registered: ‎06-01-2012
0

Re: Low inventory

Owners who could not afford their payments have already been foreclosed on or gone the short sale route.  What is left are people who are underwater on their mortgages or people who have recently bought and are not ready to move yet.  The ones who are underwater have stuck it out this long and are going to wait for prices to go up so they can make some money on their sale.

Regular Contributor
RWW
Posts: 63
Registered: ‎03-14-2012
0

Re: Low inventory

[ Edited ]

Two words: new home

 

With the total garbage houses on the market, and "supply and demand" prices I really don't think there is another option.  That or waiting this out....

 

In some sense I almost want to sit on the sidelines to watch this inventory spectacle (http://www.deptofnumbers.com/asking-prices/california/san-jose/)...how low will it go?  1500?  1000?  How about 500?  How much will prices rise in 2013?  10? 15? 20? 30? Hell....how about 40 percent?  The problem with these kinds of exaggerated trends is the correction is ultimately equally painful.    All the old timers from the bay keep talking history, but I think this is different than anything in recorded history.  From that stats this inventory spectacularly low for many reasons already mentioned (underwater owners, lack of land, investor FC purchases, banks "managing" inventory), but "high demand" simply isn't one of the reasons.  Relative to supply perhaps yes, but that's pretty meaningless in a market of this size.

 

At some point I think even buyers will respond by going back into hibernation instead of buying the junk which is being put on the market.

Super Contributor
donjumpsuit
Posts: 245
Registered: ‎08-07-2012

Re: Low inventory

I have a moment to waste on the obvious, and am the resident conspiracy theorist, so here goes.

 

1. Yes, New Homes.  Harder to build in California, with city, county and state regulations, EPA, and earthquake rules. "They just don't' build them like the used too" and the margins are slim.  Most projects never get off the ground, and the recession certainly didn't help this trend.  Less new homes but increased net migration will cause a problem with inventory.

 

2.  The move up buyer is gone.  The natural cycle of starter homes -> move up homes is broken.  People are underwater or at t he waterline on most of the properties purchased in the last 10 years.  Now that this cycle is missing, there is less overall activity in the home market, and burdens traditional sales (new buyers or migrants) by gobbling the inventory up.

 

3. Distressed pipeline of homes is gobbled up by investors or flippers.  Investors laid waste to an already declining inventory by shifting assets into California real estate which due to all the factors listed here, only has the potential to appreciate in the "Long Run'.  Investors are looking to buy and hold, with rent showing the ability to still make a return on an investment, while waiting for the final pay-out.  For US citizens, new mortgages can be added to deductions on taxes, something traditional stocks and investments don't typically yield.  We will see if the mortgage interest tax breaks continue in Trier current form.  

 

3a.  Flippers is big business again, even bigger perhaps.  Flippers borrow money from Cash investors for about 14% interest and try to strip and flip in 3 months or less (there is a penalty on the borrowed money after 3 months).  There are quite a few successful groups out there, who are taking advantage of the fact that homes are not languishing on the market, especially the ones that have new paint, crown molding, and granite countertops.  The flippers out compete typically the lower end or first time buyer market because they pay over the price the house could be appraised at for a traditional mortgage, and then throw cash at it, while eliminating financing contingencies and inspection contingencies.  They typically win the bids in this manner.  The last technique they use is ARV.  After Repair Value, and times this by 0.7, and subtract the cost of renovations.  SO they are actually buying the home based on what they can sell it for, repaired in three months.  That price is typically way more than today's buyer would or could spend on a home with a 30 year timeline.

 

4.  Banks are not foreclosing.  No matter what people say, there is still some severe delinquencies around.  If people are allowed to still live in a house they are not paying a mortgage payment on, this eliminates it from returning to the inventory, and the people who live there to also require housing, whether renting or living with others.  All three situations would slowly improve the market.  Also, in situations where there are large homeowners fees, or taxes due, the banks would rather not be responsible for fines or fees, but rather let the delinquent homeowner be technically responsible.  Lastly, banks don't have to report the loan as a loss until foreclosure, so at times it's just creative record keeping that is keeping people in homes they are no longer paying for, which is also slowing down the return of these homes to inventory.

 

5.  There is reports of shadow inventory, however big that is, and however big that amount is in the Bay Area, it still exists.  It seems some of the properties that return to lender and are not sold right away.  Only those that are of the highest value are hitting the market.  The banks have noticed the lack of inventory is boosting prices, and would be foolish to change this on Trier own.  Whether more homes return to market by those who own them is one thing, but the banks won't be propping up inventory numbers just to watch prices plummet.  The banks will hold properties that are the most distressed, and will wait for the market to return, or for investors to buy them off the MLS for a premium rather than try to sell them on the open market where they will be nickel and dimmed for inspection contingencies and other problems traditional home sellers are required to address before the title passes hands.  

 

6.  Mortgage rates are so low, that if you have to buy a house, and are financially prepared to do so, it would be foolish not too.  So they are getting into the game and sometimes paying more for a house now, but realize that borrowing on 3.5% in the long run is super cheap, and most likely costs around $100k-$200k less than a mortgage at 6% over 30 years.  

 

7.  No matter how bad the economy appears, the Bay Area is protected, and the tech companies in this area are doing better than ever.  The success of higher priced homes and homes near these tech hubs is buoying the market all across the bay area.  

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
0

Re: Low inventory

  Well, since I am not lazy to browse the forum, here I go again.

 

  Many people argue against government intervention (GI). But, we know all well he has been involved in everything since Fannie and Freddie were brought into the government side by our dear press. Bush.

 

  Again, many also argued about the effectiveness of the famous bail out for the banks. We go to the side that says it was a good decision but then to the other side that says after that there should have been firing squads ready to put those dishonest CEO's against the wall after they took the money and served themselves with juicy bonuses. After this action, I saw the stock and housing market didn't have any control. The subsequent fines to these banksters where they paid generous amounts of money to settle for robosign, etc. gave me the impression they were just like Pilatus, cleaning their hands with blood. They are like animals, the banks are going through their own adaptation as they are learning to walk on the ropes one and a thousand times. They have made calculations of what they gain or what they lose if they let a homeowner stay in a home instead of foreclosing. Since they invested or lost (per se) 1-2 years of income from those dead beats, they are not mad anymore if they see that property prices have surpassed the amount they lost during those years.

 

  Yes, now they know that a short sale doesn't have to be a short sale anymore. They are not waiting for your pity to put x home on the market. Because unless you are retarded like me, you may remember when people would say "short sale? Are you out of your mind?". Now, they are sought for. Anything is welcomed. Banks know that, and they are not in a hurry to sell if they are not going to make a buck. There will be exceptions, but that's not the rule.

 

  The future will be complex. Same as short sales that were over looked in the beginning, rentals are going through the same stage. There will be pretty soon so many in the market that they will soften the prices somehow. And if you are not like me, it was the staggering increase of rental prices that pushed us to move and buy.

 

    Supply and demand plays a big role here. And this will be crucial, this type of housing market can't be sustained if the immigration into/within the Silicon Valley diminishes. As of now, more people with ability or resources to buy immediately are coming in, displacing those who can buy but are not wealthy enough to fight the carnage. Once that people stops moving in, and rental prices getting cheaper, we will see the real market playing its role. And for that to happen, we need (God forbids) to see a major catastrophe, a mayor crash on the labor side or a stagnation of some sort, and perhaps one or more of those big shot companies crashing to the ground.

 

  Like I said in another topic, what we are seeing is more people coming to live here than what homes can house. Like I said, if anything wrong happens, then we'll see as in a scene of Gone with the wind, dead corpses and horses lying around.  And we don't want that to happen. Do we?

 

  Like me, you can agree or disagree with me or others. You can mumble jumble like me, but nobody will be able to predict with exactitude what's going to happen. Otherwise, allow me to ask you for the lottery winning numbers for today.

Silver Regular Contributor
sfsfr
Posts: 689
Registered: ‎04-15-2012
0

Re: Low inventory

Inventory is low for a few reasons. There are fewer distressed properties (foreclosures/short sales). Current owners aren't selling because prices are still below peak. Low inventory also has a feedback loop. Move up buyers have little to choose from so they aren't selling. Also, there is less available simply because houses are selling fast and are taken of the market quickly so inventory doesn't accumulate. On top of it all, you have the seasonal slow down in winter.

Platinum Regular Contributor
tjh
Posts: 4,794
Registered: ‎01-09-2010
0

Re: Low inventory


buyinghouse wrote:

 

"Otherwise, allow me to ask you for the lottery winning numbers for today."


buyinghouse:

 

Wait a minute!  I know I have that little piece of paper from that fortune cookie I ate last night at the Chinese restaurant.  

 

Not only did they tell me I would be great success in life, they gave me the five numbers I needed to play on Super Lotto to achieve financial success.  

 

And all of this was included in the price of my dinner.  And I'd be happy to share it with you!  :smileyhappy:

Regular Contributor
gfhandel
Posts: 173
Registered: ‎06-07-2011
0

Re: Low inventory

Those homes that are selling quickly in the area I've been  monitoring for the last few years are nice turnkey properties closing  anywhere 10%-20% above sales earlier in the year.   The listings that remain unsold are usually those that have location or condition issues.