Shortage of homes for Sale creates a buyers dilemma
With the inventory of homes for sale in Sacramento at an all time low, many buyers are having a difficult time buying a house. The decision has to be made: continue to fight for a house now or wait a little while and buy when inventories are a little higher and favor buyers more. The problem with waiting is prices will most likely be higher and interest rates could also be higher. Most buyers are just doing their best to stay positive and keep writing offers until they get one accepted by a seller. here's a recent article discussing this dilemma for buyers going on across the state of California.
Home buyers face dilemma with shortage
by Kathleen Pender of SFgate Published March 9, 2013
The sharp drop in homes for sale poses a tough choice for buyers: Jump in now and compete with hordes of others or wait until inventory improves.
If you buy now, you might have to pay above asking. But if you wait, you could end up paying an even higher price and a higher interest rate if you need a loan. That's because inventory won't improve until prices rise enough to get more homeowners to sell and more builders to break ground.
The inventory shortage is especially acute in California. Of the 30 largest housing markets, the four with the biggest drops in homes listed for sale on Zillow in February compared with February of last year were Sacramento (48 percent), Los Angeles, San Francisco (41 percent) and San Diego.
Although listings are increasing on a month-to-month basis as the busy spring season gets under way, Trulia Chief EconomistJed Kolkopredicts they won't start rising on a year-over-year basis for a year or more.
An example of that: "In all of Millbrae, there was one listing two months ago. There are about a dozen now," saysRoger Dewes, a Coldwell Banker agent on the Peninsula. In a normal market, there might be 20. "We are not there yet, but going from one to 12 is quite a leap," he says.
Experts cite five factors contributing to the inventory shortage:
-- Fewer foreclosures are hitting the market. "California did a good job of disposing of its backlog" of distressed properties, says Zillow Chief EconomistStan Humphries.
In California, where most foreclosures are handled out of court, the process is taking about 11 months on average, according to RealtyTrac. In New York and New Jersey, where foreclosures go through a court proceeding, the process is taking 36 and 32 months, respectively.
-- Many people still owe more than their homes are worth. If they sold now, they would have to come up with extra cash to pay off their loan. Although prices have rebounded from their lows, 23.3 percent of homes with a mortgage in San Francisco, San Mateo and Marin counties were still underwater in the fourth quarter of 2012, according to Zillow.
-- Even if they are not underwater, many owners won't sell for less than they paid. If they bought near the peak, it may take a while before they are ready to budge.
The median price paid for a new or resale home or condo in the nine-county Bay Area was $415,000 in January. That's less than halfway between its low of $290,000 in March 2009 and its high of $665,000 set in June/July 2007, according to DataQuick.
-- Many people, even if their homes are worth more than they paid, won't sell because they are afraid they won't be able to buy another house. "It becomes a game of musical chairs; they are afraid to get out because they can't get back in," Humphries says. This becomes "a self-reinforcing cycle" that keeps homes off the market.
-- The housing bust put new construction on hold.
The shortage comes at a time when demand is rising in the Bay Area, not just from regular buyers but from investors, second-home buyers and foreign buyers, especially from Asia.