Starting late last year real estate agents, and then their clients, started noticing a dwindling inventory of homes on the market. And nearly as quickly as the glut of homes on the market appeared, they again disappeared. Talk about accelerating the real estate cycle! But there are clear and comprehensible reasons for it, and the good news is that it does not necessarily signal a future of rapid growth and crash cycles.
We are in a unique time, coming out of a historically dangerous economic cycle that hasn't been seen since 1929-1934. We know what lead to it and what the result was (real estate speculation, elimination of regulations from FDR's day to protect consumers, fraud on the part of the big banks and insurers, as well as false stated-income applicants (which the banks and insurers still had to approve) and then an unsustainable price range and payment structure that lead to the near collapse of the market.
This collapse had a few consequences that are only being worked out now: millions of homeowners are now renters. They have to save and wait until they can buy again. Their homes were bought up in large part by investors who either are renting those homes out or fixed them up and flipped them. Those homes are all but cycled through the system, and are off the market.
Those who bought and kept their homes are still "under water" in many cases. Home values are not at their 2005 or 2006 highs, so the vast majority of homes bought in the years leading up to the crash cannot yet be sold
without a loss to the owners.
Many people who would have lost their homes were protected by different government programs to help them stay in their homes. While many with loan modifications went on to lose their homes anyway, as the recession raged on and they lost their jobs, about 50% have been able to keep their homes and are in no position to sell.
Combine that with the fact that credit dried up and almost all builders ceased their construction activities, and we have a housing shortage.
So where's the good news? Those who bought their homes before 2003 do have equity and in many cases can sell their homes. The recession brought them (most of us) the hunker down and bunker mentality and they stayed put hoping to not be swept up in the turmoil. Sadly, some of them also lost their jobs an also their homes. Most did not and the are the ones who are slowly returning the sales cycle back to normal. Their numbers are not huge, but they are growing. The National Association of Realtors reported a 0.6% increase in the sales of previously owned homes over the month prior. That may sound dismal, but it's the first increase in a long time.
What's more is that the inventory of homes for sale increased by 12%, the biggest jump since September 2012, when it first started drying up.
Different expert estimate that inventory will improve within two months. In my market of greater Long Beach, California (including Los Angeles), it looks like we'll see the most inventory right as the market winds down for the holidays - 4th quarter. Perhaps we'll see many more families celebrating New Year's in their new home.
Please click on the link for the article providing the sources for the facts cited in this blog.