We are only 10 days into the New Year and housing trends for 2020 are already emerging full force. One of the recent, dominating news stories thus far pertains to inventory. Wait – we know what you are thinking... haven’t we already seen inventory lows? Isn’t this just the same old news?
Not quite! Here are a few notable data points to help you understand the current posturing of supply and demand.
| Forbes projects “next year may just see the biggest housing inventory shortage in U.S. history.” By the end of 2019, only 1 out of 10 markets saw inventory growth. Coupled with the fact that more Baby Boomers are aging in place and over 55% of homeowners are aged 50 and older, the most recent forecasts declare that buyer challenges have less to do with what they can afford and far more to do with what they can find.
| Housing Wire reports the largest year-over-year housing inventory decline in almost 3 years, with a 12% supply drop. With a reported 4.8 million millennials reaching age 30 (prime home buying age), the buyer pool is growing while available homes for sale are shrinking. Locally, inventory dropped 30% in December in the metros of San Jose-Sunnyvale-Santa Clara and San Francisco-Oakland-Hayward.
| Housing Wire also reports that nearly 7 million new homes were built in the last decade, with 23% of these starts occurring in the West. However, a shortage of skilled labor and home building materials as well as a homeownership rate of nearly 65% by Q3 of 2019 culminates in a continued imbalance in production and purchase. Bottom line: new construction is happening, but it is not enough.
| The Washington Post reiterates that not enough homes are being built, while pointing out that unemployment is hovering at 50-year lows and homeowners are staying in their homes longer. The resulting ‘bottleneck’ is likely to cause ‘inventory to evaporate’, with existing home sales expected to drop almost 2%.
| The Fannie Mae Home Purchase Sentiment Index (HPSI) demonstrated a strong increase year-over-year at the end of 2019, with an 8.2% uptick. Reasons cited include higher income, a lack of concern over job loss and the anticipation of sustained low interest rates. Notably, the largest month-over-month gain in the survey was the number of respondents who expected home prices to rise over the next 12 months. Buyers may be looking to buy and start building that equity ASAP.
| The Street states that millennial buyers are the ones to watch out for. Millennials are expected to take out more mortgages than Baby Boomers and Generations Xers in 2020, have bigger down payments than ever and have their sights set on 1,800 square foot homes with good neighborhoods and decent schools.
While we may be unable to fix the highly anticipated inventory shortage, we can manage buyer and seller response.
Buyers: Our best advice for you is do not go this alone. Work with an experienced and highly connected agent team that can keep you apprised of off-market listings that meet your needs, as well as create marketing campaigns that target the homes and neighborhoods you have your sights set on. Do not limit yourself to what you see on the MLS; we love utilizing our experience, our relationships and our reputation to level up our buyers’ opportunities. We have done it before, and we can’t wait to do it again!
Sellers: Selling your home may be the ‘easy’ part… but getting your max ROI from a qualified buyer and making sure you have a place to go next will be the most important pieces of your puzzle. Your timeline is our priority, and we are committed to your entire process and outcome – not just getting that sold sign-up (although we really do like that part too!).
All our best,
Mark
Mark Barber
408-291-0072
DRE 01220031
Equal Housing Opportunity.