Who stole my Inventory? 50% Drop In Some Areas
In many parts of San Francisco and the rest of the Bay Area real estate inventory levels sit at one to two month levels which has caused feeding frenzy for home starved shoppers.
Things have become so bad that developers now rush to get their condos, single family homes and town homes everywhere from San Mateo to Upper Market. We took some numbers from Redfin that showed 2013 inventory figures for San Francisco and San Jose at 50% compared to one year ago. (See accompany chart)
Many people continue to speculate about the reasons for the low inventory such as a lack of new construction and investors snatching all of the rental properties.
Four Reasons For The Inventory Shortage
Here we offer a few reasons:
1- Owners with short memories think their home will escalate in value like the number in 2005-2006, so they continue to hold onto their property even they wish to sell it. Many sellers seek to wait for the virtual peak before they sell their property. Don’t hold your breadth.
2- With the new California Homeowners Bill of Rights taking effect, bank are nervous (or at least reticent) to move forth with the foreclosures without making absolutely sure that they have not made some error that could result in a lawsuit.
3- Even with the recent surge in prices many homes continue to sit underwater so homeowners seem hesitant to jump ship with a short sale. Some of these homeowners might reconsider as they have until the end of the year to take advantage of the one year extension of the Mortgage Debt Forgiveness Relief Act.
4- Many “move-up” or “scale-down” homeowners who do wish to sell have reservations because although they would have no problem selling their home, they may encounter difficulty buying their replacement home.
Things will most likely not remain this way for all of 2013. Eventually the banks will release additional REOs and interest rates will tick up which will impact the market. It should be an interesting ride here in San Francisco and the rest of the Bay Area.