Low housing inventory is affecting the country as a whole right now, and has played a huge factor in the market since the pandemic. What does it mean for buyers and sellers? Read on. . .
#1 Why is the housing inventory low?
All of the areas our team services are unique from metropolitan areas because they are landlocked. There isn’t room to sprawl since we are literally surrounded by mountains from Eagle all the way to Georgetown. Combine this market nuance that has traditionally played a role with after effects of the pandemic, and we now see historically low inventory.
#2 What are the “after effects” of the pandemic?
A. Another “historical low” just a few years ago was interest rates– even for second home and investment loans. The difference in a monthly payment on a $300k conventional 30 year loan at 3% interest vs. the monthly on a $300k loan at 6% interest is over $500/ month! This incentivized more sellers to sell at premium prices, and enticed more buyers to buy (even at a premium).
B. The influx in sales also came from the way the pandemic shifted traditional office environments to fully remote- and many never shifted back. “Remote” is now a permanent location option on Indeed, and this likely isn’t going to change any time soon. Working virtually anywhere means that people that previously only vacationed in the mountains are now choosing to make it home (or a true second home).
C. Production of building materials and appliances completely halted for a good amount of time- companies are still backordered. We have clients with reports of custom cabinets being 36 months out, and appliances being 18 months out. The cost of plywood skyrocketed 40%, along with the cost of other materials as well. All of this has made new construction slower to start- new builds have been down over 25% since 2020 and have not bounced back.
D. Continued high demand in resort areas combined with slow construction starts and depletion of an already low inventory in our market has kept housing prices at a premium. Even considering rising interest rates and changing short term rental regulations, the market remains strong. There are some new construction opportunities, though- check them out here.
#3 How does this affect Buyers in our market?
Buyers first feel how low the inventory is as they’re searching. When before the pandemic they may have seen 5 properties a week come on that fit their criteria, now they might see 1 a week. And, chances are, there are other buyers looking out for the same thing. So, the next area they feel the effects is in offering and negotiation. While we aren’t seeing 10 offers per property anymore, when a great, well-priced property comes on, we still expect multiple offer situations. It could still take 3-5 offers before one sticks. (Side note- with a change in the current landscape of the market as it relates to interest rates, we are seeing benefit in different loan options and even asking for seller concessions)
#4 How does this affect Sellers in our market?
Properties are holding value and bringing in great offers when priced well. We can still elicit competitive offer situations allowing sellers to make a choice in which one they choose. Listing their home when inventory is low means that there aren’t often properties like theirs on at the same time, so they’re likely attracting a number of prospective buyers at once.
While low inventory affects our market, changing short term rental regulations and interest rates have played a role as well, and not all necessarily for the good. If you’d like to learn more, email us at Team@COMtnRealty.com – thanks!