What to Do When Tight Inventory Scares Buyers and Sellers

/What to Do When Tight Inventory Scares Buyers and Sellers

How to read the Inventory signals

When it comes to our real estate business, the overall economic news seems to be great at first glance. The economy nationwide is nearing full employment (though April’s jobs report was shy of anticipated numbers), interest rates have been mostly stable at or near historically low rates. Both of these factors drive demand, and should be causing houses to be flying through escrow in record numbers.

But this isn’t what is happening. Here in the Phoenix Valley, sales are actually slowing after a spike in early spring. According to Cromford Reports, May Pending listings (which will usually show up as June sales) are down 6.6% over 2016. Under Contract listings (which will likely close in July) are down 4.6%. The same trend is showing up nationwide, with the NAR reporting a slowdown in sales across all four regions as compared to 2016, despite strong foot traffic and buyer interest.

Why are sales falling when demand is high?

Well, it’s a basic rule of economics that demand isn’t all there is to the equation. You need supply to meet the demand, and when you don’t have it, prices rise and buyers get discouraged. Rising prices might push unencumbered buyers to act now before they rise further, but for sellers there’s a fear that when they sell, they may not be able to find a new home that is right for them at a price they can afford.

Faced with these concerns, they may decide not to list. On the other hand, selling a home for the great price they could get today has its appeal, if they can be reassured about the supply issue.

This seems to be the challenge we’re currently facing. Supply is definitely short, both nationally, and here in Arizona. Cromford Reports has noted a decrease in listings for the last two months straight. Active listings were 11.9% lower when comparing against 2016; For April, listings were 13.3% lower. Yet prices are rising – median sales for May 2017 were 6.6% higher than last year.

What can we do to assist buyers and sellers who want to make a move in the current environment?

The Fed is expected to announce rate hikes later this month, which may address the imbalance of demand and supply from the demand side. Over the next few weeks I’ll be presenting some strategies to help build your business in the current tight inventory market – ways to reassure your buyers and sellers, and how to find the right homes for your clients even when listings are tight.

And I’m curious – what strategies are you using to bring buyers and sellers together in this challenging market? Let me know in the comments.

2017-07-23T21:56:50+00:00 June 5th, 2017|

About the Author:

A native Phoenician serving Arizona Homeowners with over 14 years lending experience and currently the Vice President and Partner of Signature Home Loans LLC. Eddie has been a mortgage broker since 2003.

3 Comments

  1. Theresa E Shaw June 6, 2017 at 3:59 pm - Reply

    Thank you for sending this. Without looking at stats, I have been feeling this trend for maybe a month.
    The uncertainty over the health care issue and next year’s premiums for people doesn’t help.

  2. Ed McAvoy June 7, 2017 at 8:48 am - Reply

    Eddie,
    Some of my buyers are hesitating to buy because they cannot find the house they want so they are reluctant to list their home. We are waiting on new construction in September which will provide more choices. For investors,the market is also tight but because they have more cash we are winning in situations where there are multiple offers.

    Ed McAvoy
    West USA REALTOR
    480-387-0293

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