Housing inventory is low?

Discussion in 'Economics' started by TraderD, Feb 9, 2004.

  1. TraderD


    Is this a reality or a myth circulated by interest groups to draw in suckers?

    I am reluctantly looking for a house. So, my agent (pretty decent guy) sends this to me (we had a prior talk on low inventory):

    "...... Friendly warning:the prices will increase sharp and will see crazy market in very short time. ...."

    My reply:

    "...By accident I watched a local evening news. They have actually talked about housing inventory statistics in WA state (you mentioned this to me earlier). According to them, inventory is down 13% comparing to January of 2003. They talked about it very seriously... Well, to me fluctuation of such magnitude does not seem to be a significant number, especially when in low interest environment...."

    What do you think?
  2. pspr


    Sounds like it is already priced into the market. Look at building starts for your area.

    My experience with Realtors, even those who are friends, is that they are motivated to get one to act. They implore the buyer to buy now because of this or that and implore the seller to lower their price too quickly if someone isn't right there to buy it now.

    They have a mind set that they have to limit the amount of time spent with each seller and buyer so they can go on to the next or have time to concentrate on prospecting in order to increase their income. So their motivation is to do what it takes to get a contract signed as soon as possible.
  3. IMO the inventory is quite low, and that is one factor keeping housing strong. One of the things keeping inventory low is people realize while they can command a very high price for their existing home, any potential home they may consider (providing they want to stay in the area) will be priced even higher.

    That presents all sorts of problems with very high real estate taxes, etc. So many stay where they are. It would be quite the time to sell in these high priced areas if one were considering moving to a lessor appreciating area, say like South Dakota, etc

    I feel this is a poor time to buy, especially for a first time buyer....but this subject has been well covered recently in a few other threads. It is very hard to see right now while in the midst of a hot market, but I feel there will be better times ahead for purchasing real estate. Don't be bullied into buying, rather buy when no one else wants real estate.
  4. TraderD


    Yes, I would dismiss this as a sales pitch, but in addition to his info some valid stats exist as well...
  5. If inventory has declined, and the buyers come out in the spring due to low rates, without a corresponding increase in inventory....well, maybe your realtor is right. Lower supply, same or higher demand equals rising prices.

    That said, realtors are noted for statements which cause one to act...that's how they make money, just as the prior poster said. And the truth is, he does not know the future. The problem is, you don't either.

    Inventories typically decline in the December-Februrary type of period because of seasonal factors. Inventories usually start to build up in the springtime...which is generally the prime home buying season. The buyers will be out in force at that time generally.

    But frankly, if you're going to buy a house, the most important financial factor in the short run is the interest rate. And as you know, those are low and favorable.

  6. pspr


    Do your own analysis. Find out monthly single family home sales, building starts, homes on the market, and where they have been in recent months and what has happened to priced during those times.

    But don't just buy something you won't be happy with or you'll be sorry for a long time.
  7. I'm surprised no one has mentioned that many people are buying second homes thus increasing the unavailability of houses.

  8. You bet. Demand surpluses supply.
  9. TraderD


    This crossed my mind not just once. The question is what is the percentage of homes bought for cashflow/speculation. If that percentage is large and people get overextended, bad things may happen. I have recently talked with a property manager - she said business is so-so...
  10. Most of the people declaring bankruptcies in the past few years cited credit card debt and a loss of income as the source of their financial problems. Maybe people who buy second houses are a little more responsible with their finances than our plastic charging friends. Who knows.
    #10     Feb 10, 2004