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Regular Contributor
FurnitureBroker
Posts: 85
Registered: ‎05-28-2010
0

Black Friday and low inventories

Hope everyone had a great Thanksgiving and snagged some good Black Friday deals.  I tried to pick up a $0.96 Smartphone at warehouse club at 7:30AM Friday.  When I went inside the store, I lined up at an area that seem to lead to the cell phones, and then asked the people ahead of me, "Is this the cellphone line?".  To my dismay, they probably gave out all the vouchers at 3AM.  So limited inventory of items will lead to people to line up at 3AM.

 

Why are housing inventory levels so low.  (Shadow inventory has been discussed so much on this forum, so let's not go there).  I have buyers that tell me if I see something good/cheap, they will take off work to see it.  So like Black Friday, we have homebuyers that will lineup to buy homes.   Normally, if there are more buyers than sellers, the price goes up, more sellers will show up to sell their homes.  I'm noticing price tick up only slightly, but why aren't more sellers selling?

 

I have a feeling that the consumer confidence is not there.  People are afraid to make a big purchase.

 

The bears may say that prices are artificial, it's unsustainable.  I believe part of that is true.  But we don't make the rules.  Mr. Bernanke told us he will keep rates low for the near future.  We can only listen and interprete what the policy makers are doing, and decide what's in our best interest.  Low rates usually inflate assets as everyone is chasing yields.

 

Until inventory increases (without price increasing too much), I think we will continue to have pent up demand on the sidelines.  

 

What's your take?  Will inventories increase?  How, are more homeowners going to sell?  I don't see LA building too much due to limited space & regulations.  Or will potential homebuyers just continue to rent, and be satisfied that to buy in LA does not make financial sense (see rent calculator).

Contributor
kimstone
Posts: 28
Registered: ‎04-30-2008

Re: Black Friday and low inventories

My opinion...We are not seeing more sellers becasue they are not in a position to sell. Most folks around me have no equity in their homes and negative equity in some cases. Yeah, they could sell their house and maybe just maybe break even but have no downpayment for their next house. I am speaking for neighbors/friends that purchased homes between 2000 and 2010. On the other side, folks have refinanced with programs like HARP and they are quite content to stay in their home paying a lower monthly mortgage. I personally see a slight uptick in homes coming on the market in the Spring but not some great rush of people listing their homes..Then on the bank side and REOs..Truly banks controlling the market there.

 

This is basic economics 101 we see right now with supply and demand...

Silver Trusted Contributor
GEAH
Posts: 955
Registered: ‎10-22-2010
0

Re: Black Friday and low inventories

I agree with kimstone. Too many people are underwater, and will only go short if it's an emergency. Otherwise, you just pay your mortgage and wait it out. And, yes, the banks are manipulating the market as best they can with their inventory, and that activity is financed by the taxpayers. What a scam that is.

Gold Regular Contributor
sheriff
Posts: 2,389
Registered: ‎06-01-2012
0

Re: Black Friday and low inventories

[ Edited ]

FurnitureBroker wrote:

Hope everyone had a great Thanksgiving and snagged some good Black Friday deals.  I tried to pick up a $0.96 Smartphone at warehouse club at 7:30AM Friday.  When I went inside the store, I lined up at an area that seem to lead to the cell phones, and then asked the people ahead of me, "Is this the cellphone line?".  To my dismay, they probably gave out all the vouchers at 3AM.  So limited inventory of items will lead to people to line up at 3AM.

 

Why are housing inventory levels so low.  (Shadow inventory has been discussed so much on this forum, so let's not go there).  I have buyers that tell me if I see something good/cheap, they will take off work to see it.  So like Black Friday, we have homebuyers that will lineup to buy homes.   Normally, if there are more buyers than sellers, the price goes up, more sellers will show up to sell their homes.  I'm noticing price tick up only slightly, but why aren't more sellers selling?

 

I have a feeling that the consumer confidence is not there.  People are afraid to make a big purchase.

 

The bears may say that prices are artificial, it's unsustainable.  I believe part of that is true.  But we don't make the rules.  Mr. Bernanke told us he will keep rates low for the near future.  We can only listen and interprete what the policy makers are doing, and decide what's in our best interest.  Low rates usually inflate assets as everyone is chasing yields.

 

Until inventory increases (without price increasing too much), I think we will continue to have pent up demand on the sidelines.  

 

What's your take?  Will inventories increase?  How, are more homeowners going to sell?  I don't see LA building too much due to limited space & regulations.  Or will potential homebuyers just continue to rent, and be satisfied that to buy in LA does not make financial sense (see rent calculator).


I am from the bay area, where prices have jumped about 20% in the last year and people still aren't selling.  Inventory is at an all time low.  The same problem here with NIMBY's limiting the area available for housing so not much more can be built.

Even in areas that are above bubble prices, the inventory is still low.

 

Regular Contributor
FurnitureBroker
Posts: 85
Registered: ‎05-28-2010
0

Re: Black Friday and low inventories

Kim, Geah,

 

  I understand the negative to slightly no equity, and that's a good point.  Can I ask what area?  Most of LA is still very close to 2006 peak pricing.  The exurbs are the ones that have more negative equity issues.

 

  I agree, anyone who got help with HARP, or just refied at the low rates on pre-2004 prices are content to stay in place, since their mortgage is about the same as rents.   Yes, the banks have succeeded in limited the supply of REOs (again, we can debate this back & forth).

 

The supply & demand is where I am failing to see.  Low inventories with great demand usually mean prices will rise, but I don't see a substantial price increases.  At least the price increases are not large enough to entice more sellers to sell.  If the price increases were substantial, then the little or negative equity homeowners (in LA) would be positive and would sell.

Regular Contributor
FurnitureBroker
Posts: 85
Registered: ‎05-28-2010
0

Re: Black Friday and low inventories

Sherriff, can you clarify a city in the Bay that experience 20% price increases? 

 

Assuming 20% price increases, why is inventory still low?  Any ideas?  I understand building restrictions.  But why is it that volumes are so low?

Gold Regular Contributor
Andiamo53
Posts: 2,084
Registered: ‎07-12-2010

Re: Black Friday and low inventories

[ Edited ]

FurnitureBroker wrote:

Kim, Geah,

 

  I understand the negative to slightly no equity, and that's a good point.  Can I ask what area?  Most of LA is still very close to 2006 peak pricing.  The exurbs are the ones that have more negative equity issues.

 

  I agree, anyone who got help with HARP, or just refied at the low rates on pre-2004 prices are content to stay in place, since their mortgage is about the same as rents.   Yes, the banks have succeeded in limited the supply of REOs (again, we can debate this back & forth).

 

The supply & demand is where I am failing to see.  Low inventories with great demand usually mean prices will rise, but I don't see a substantial price increases.  At least the price increases are not large enough to entice more sellers to sell.  If the price increases were substantial, then the little or negative equity homeowners (in LA) would be positive and would sell.


"It's the economy, stupid" (quote from Bill Clinton). Even if potential sellers have a  bit of equity built up, where are they gonna move to when they sell? Another house in California will be equally pricey and to get a loan these days you have to show a very reliable income stream--self employed people need not apply.

 

I guess what I'm saying is that the housing market seems to thrive when there's a lot of move-up buyers (who can actually afford to buy). Today's California economy does not favor move-up buyers--high unemployment/self employment rates, stricter borrowing environment (which is as it should be)  and too little equity makes for a perfect storm of seller paralysis.

 

Trusted Contributor
prunoid
Posts: 164
Registered: ‎01-16-2009
0

Re: Black Friday and low inventories


GEAH wrote:

I agree with kimstone. Too many people are underwater, and will only go short if it's an emergency. Otherwise, you just pay your mortgage and wait it out. And, yes, the banks are manipulating the market as best they can with their inventory, and that activity is financed by the taxpayers. What a scam that is.


We voted in a president whose intent is to "level the playing field" for all. We have no losers now no matter what our actions are.

Contributor
missjane
Posts: 14
Registered: ‎05-19-2011
0

Re: Black Friday and low inventories

This is my situation.  I have plenty of equity built up for a down if I sell, but there's nothing to buy!  In the neighborhoods of the Vally where I am looking there are  almost no properties for sale.  

 

If I were single, I would probably risk it and sell, but I do not want to put my children through the stress of having nowhere to go and then end up being in an apartment renting. My mortgage is so low that I don't even think I could find an apartment to rent for less!  So I guess I'll just suck it up in my little house, where at least I have a yard, and wait for inventory to improve.

Silver Regular Contributor
WheelinDealin
Posts: 563
Registered: ‎01-25-2012
0

Re: Black Friday and low inventories

[ Edited ]

Andiamo53 wrote:

"It's the economy, stupid" (quote from Bill Clinton). Even if potential sellers have a  bit of equity built up, where are they gonna move to when they sell? Another house in California will be equally pricey and to get a loan these days you have to show a very reliable income stream--self employed people need not apply.


I beg to differ. Being 100% self-employed, I managed to get a mortgage and buy my 1st home in June of this year. It wasn't easy and required a lot of help from my CPA. In the end I had to go with a small direct lender, since none of the major banks would touch me without W-2's. It can be done, you just need to find a lender that can package it right. If anyone needs a referral, feel free to PM me.