What Shrinking Inventories Mean for Home Sales.

While we are far from a complete recovery in the housing market, a few price points are seeing a resurgence of bidding wars like we saw during the boom market that ended in 2006. This is especially true in bank owned properties (REOs).

Over the last 12 months we have seen a 36% decline in active Single Family Detached resale inventory in Ada County and a 40% decline in Canyon County.  This equates to a reduction of 1,563 units in the last 12 months creating a short supply in various price ranges and sub-markets leaving only 2,663 active resale listing available for sale in both counties.

The monthly supply of resale housing varies by the following types of properties: REO, Short Sale, and Traditional (Sell to Buy) properties.

The supply of bank owned properties (REO’s) sits at approximately 268 or about 10% of the entire inventory. Over the last 12 months the number of bank owned properties has declined by nearly 50%. This short supply has created a frenzy market forcing multiple offers driving the final sales price higher than the asking price by as much as 20%. Based on last months sales there is less than a 30-day supply of REO’s. In the last 5 months 36% of all transactions have been bank owned now with only 10% of the available  inventory bank owned, prices are going UP!

In the Short Sale sub-market there are 1,172 available homes in both counties, which is a 27% reduction from 12 months ago. Of those, 675 already have an offer pending the bank’s finale approval leaving less than 500 “truly” available for sale. About 12% of all closed transactions are Short Sale. Since the first of the year, the market place has closed 3,587 homes with approximately 430 being short which equates to 86 short sales per month. It’s difficult to determine the months of inventory in this sub-market because we really do not know if the 675 properties with offers will close or if they will end up as an REO. What we do know is that it takes a Short Sale specialist to navigate the short sale details in order to have a successful closing.

The traditional Sell to Buy market has 1223 active resale properties and in the last 30 days 359 closed escrow leaving an approximate supply of 3.4 months. This sub-market over the last 5 months has represented 38% of all closed transactions, but in the last 30 days this percentage has jumped to 42%. The reason for this jump is combination of the lack of decent REO’s and the tedious Short Sale process.

Due to this very limited supply of listings in the most price ranges, many homebuyers are in the unenviable position of sitting and waiting for new homes to come on the market. This could be because sellers have heard over and over again in the past few years that it’s a “buyers’ market” and they are unwilling to put their homes on the market when conditions have not been in their favor.

Whatever the reason, some sellers might be wise to reconsider listing their homes. Recently, real estate professionals have been receiving multiple offers on listings within the first few weeks, sometimes days of coming on the market. Buyers are eager for more selection, and they seem ready to jump when they find a desirable home.

As you can see inventory has a significant impact on home prices. When there are four months of inventory, as there is in most ranges prices are stabilizing or seeing little appreciation. This is a positive trend.

In the REO market where there is less than a 30 day supply we are seeing double digit price appreciation at time of acceptance with buyers bidding up asking prices.

A balance between supply and demand not only puts buyers and sellers on equal footing when negotiating, it also creates a trend toward price stabilization. For now, it seems the so-called buyers’ market is somewhat mythical. In some cases, it might be more accurate to say we’ve got a balanced market.

Sellers in all price points should consult with a qualified real estate professional to determine the situation with their home in their neighborhood.