Back in 2010, there was an average of 45 houses on the market in my community. Now the average is down to 28, a 37% drop. Some buyers are shocked by the rejections they have experienced from sellers. It is a complete different market now. The sellers are chuckling at the multiple offers they have recieved. Buyers sometimes have to offer higher than the asking prices in order to get their dream houses.
Why is the inventory so low?
Two years ago, 40% of the houses on the market in my community were short sales, or what we realtors call involuntary sales. These home owners tried to sell their houses because their homes had lost half of the market values. They saw no point in making the mortgage payments, especially when banks refused to refinance at lower interest rates. In a desperate attempt to vent their frustration, these owners opted to stop paying the mortgage and short sell their houses.
The banks have learned their lessons.
The short sale process, though not as painstakingly long as foreclosure's, is a fairly complicated process. Sometimes the mortgages have more than one lien holders. The more of them, the longer the negotiation will be dragged out and the more delay it will cause.
Instead, banks are more lenient now and will refinance home owners at lower interest rates, or sometimes reduce the principal so that the owners will resume paying their mortgages. Therefore, these owners have removed their properties from the market. As the economics theory dictates, if the supply is lower and the demand remains unchanged, the price will increase. Fueled by the price increase, other home owners have seen their houses regain some of the equity that they lost after the real estate crisis. Subsequently, more home owners have cancelled their short sale listings and chosen to refinance with their banks. This cycle repeats itself as prices keep increasing. As a result, the inventory has dropped to the level we are seeing.
No comments:
Post a Comment