Low Real Estate Inventory Isn’t Always a Sign of Bad News

Low Real Estate Inventory Isn’t Always a Sign of Bad News

Low real estate inventory isn’t always a sign of bad news. It can actually be masking really good news. In the Winchester-Frederick County, VA real estate market, an inventory of 550 available homes tends to be the listing sweet spot. Everything is in balance at that point. At 550, there are enough properties to meet the demand, but there aren’t so many that market movement slows down.

The market slows when the number of real estate listing exceed 600. At 600 and beyond, buyers have so many options that they can be paralyzed by volume. Instead of looking at 3-4 homes and then buying one, they will look at 10-20 before making a choice. It takes a lot of time to look at 20 houses. If the one that a buyer fell in love with was house number 6, by the time he looks at 20 and returns to house number 6, it is under contract. That extends his search, and that can take months instead of weeks. Multiple that by 150-200 buyers and you can see how the market grinds to a crawl.

At 500-600 homes, there is level of competitive buying that forces buyers to do more research before going shopping. By the time they have isolated 3-4 homes they’re interested in, they are ready to buy. If they know that the market is moving swiftly, they are less likely to hesitate. So, what could take months is reduced to weeks or days. Because of that, the market moves at a steady consistent pace.

Low real estate inventory: Where are we today?

The Winchester-Frederick County, VA real estate inventory is at 270 (as of 12/20/17). Low Real Estate Inventory Isn't Always a Sign of Bad NewsThink about what that can mean. Few of these homes are new to the market. In any market, there are homes that have a hard time selling. Some of the reasons may be:

  • Poor condition (not maintained)
  • Poor location (crime, railroad tracks or a highway behind the house, power-lines too close to the house, too far out-of-town, rough neighborhood, poor quality or poorly maintained homes nearby,etc.)
  • Over-priced (there is little you can do with a home that priced to high)
  • Difficult to show (crazy time restrictions)
  • Conditions that cut the buyer crowd (55+ communities, HOA guidelines, etc.)
  • Zoning restrictions (types of vehicles that can be parked outside, no livestock such as chickens, goats, etc., no storage buildings, no fences and more).

Assume that a part of the current real estate inventory (270) falls into one of these categories. Of the current 270 available homes, nearly 10% (23) have been on the market for over 100 days, and the two highest properties are over 1000 days (with one over 2000). Regardless of the days on the market, a home that falls into one of the six categories above, will sit on the market, and buyers will ignore it. That makes the current inventory even tighter.

Low real estate inventory: So where is the good news?

The good news is that there are 421 homes advertised on the MLS for the Winchester-Frederick County, VA real estate market as available homes. The 151 additional properties are homes that have not been built yet. They are homes that contractors are advertising as “to be built” homes.

The good news is that home-builders are coming back into the market. That is true nationwide, and it is showing in local available listings. Nationally, home starts have risen substantially over the past few years, reaching a 10 year high this year. The increase in home-building is a sign of growing consumer confidence. When consumers are confident about the economy, they buy houses. When they are pessimistic, they stay put. Consumers are confident.That’s good news.

With consumer confidence at a 17 year high, the housing market is a beneficiary. The Winchester-Frederick County, VA real estate market may be experiencing low real estate inventory now, but if the home-building confidence continues, spec housing will become a new wave of home purchases in 2018, and it will buoy the economy.

Low real estate inventory: Incoming Business

The Winchester-Frederick County, VA real estate market is also the recipient of relocation buyers due to the increase of industry and business growth. Here again, a rise in consumer confidence increases business start-ups and business expansion.

The last weeks of 2017 will likely be slow in the real estate market, as is the custom, but 2018 looks like a rocket set to launch. It is a great time to list a home for sale. With low inventory, and the wait time for a new home to be built, sellers are in the driver’s seat once again. That means sellers can demand a little more for their homes than they could have a year ago. Buyers will need to move more quickly when they find their dream home. A low inventory real estate market creates more multi-offer contract scenarios on available homes. The bidding wars that come about because of low inventory create a market of competition. That’s good news too.

When you’re ready to list your Winchester-Frederick County, VA home, give Cornerstone Business Group, Inc., a call. We are your local real estate sales pros, and we’ll put our real estate and construction expertise to work for you.