After you read this post you will realize the “new” is really the “old” but, in the end, who cares. At least according to me.
We’ve all seen headlines that read: Existing home sales dip in August or words to that effect. Truth is, those headlines aren’t news anymore. They used to be but used to be has become the norm or maybe I should say the numb.
To add more numb to this post, we all have read articles telling us real estate practitioners and investors are expressing frustration with what they consider slow action from banks. That is, banks aren’t releasing inventory fast to satisfy the demand.
My question boils down to what do they really expect from institutions that have moved, on a historical basis, extremely slow. It is merely business as usual.
On the other hand, given a red-hot market has poked its head out of the ground we should expect business not to be usual. We should demand those institutions with a home inventory to get off their duffs and start moving the product. A home is no different than any other retail product, other than the sales price. When demand flares up, release the inventory and satisfy the demand.
I use the real estate environment in my backyard because I believe it mirrors other areas that are the same size and have relatively close demographics. Of course variables exist but I don’t believe they are that great as to skew what I write.
For example, sales in the county are significantly up from the previous year (August 2008). I’d bet sales are up all over the United States. Not like four or five years ago but up, nonetheless. This bit of news has to be analyzed to see why sales are up. In most cases, short sales and other creative deals have upped the numbers.
Could these numbers be even better? Yes, if our local Association of Realtors president is correct. He says the entry level end of the market, read new niche, is red-hot. The only factor depressing this arena is lack of inventory.
Those with properties for sale at this end are receiving multiple offers which means a lot of people are left out and looking for something else. And, naturally, that something else doesn’t exist. Owners at this end of the market who are in trouble are in some phase of the loan modification process. Therefore, they have no incentive to sell.
This adds to the frustration of entry level buyers. We could probably add other frustration factors but this post isn’t about frustration factors. It is about the re-energized entry level buyers. They appear to be there and ready and willing to plunk down their money.
Finding Inventory To Fill The Demand
I don’t have a crystal ball or magic wand so I don’t know if there are any untapped inventory sources. I do know the tried and true sources are still there. In a post I wrote a month or so ago, I talked about people who have no mortgages. I forgot the percentage of homeowners in this arena but it was significant.
If memory serves me, the majority of these folks are also of advanced age. Given this is true, these people are more likely than anyone to want to move.
Where will they move?
To senior communities. They move there because they are with people their age and have the same mindset. These communities are also now activities and enhancements heavy; that is, swimming pool(s), recreation center, ample parking, exercise room, etc.
Two such communities exist within a mile of my office. There are no vacancies. In order to buy in these communities, the people had to have money.
Where did they get the money?
They sold their home.
Will everyone sell their home?
Of course not. But, some will. If you can tap into this market you may be the “man” with the inventory needed by the entry level crowd.