Permanently Parked: Lack of Sellers

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Real Estate

There are fewer homeowners who opt to sell every year, and even with record home values, the trend continues. From 2000 to 2008, there was an average of 1,347 more homes that came on the market every single month compared to the past 10 years. That is an extra 16,158 sellers every year, 39% more. That has been the storyline for more than a decade, not enough homes are offered for sale. It is not just an Orange County phenomenon or isolated to just Southern California. Nor is it unique to the state of California. A lack of sellers has been a national issue that has plagued the real estate market and made it very difficult for buyers to isolate a home.

The lack of supply and years of red-hot demand, juiced by record low interest rates (especially since the start of the COVID-19 pandemic), has resulted in homes appreciating to record levels in Orange County, erasing the losses and sting of the Great Recession entirely. This more than a decade long trend is now the norm. Homeowners are not moving as often as they used to. Turnover rate for Orange County’s housing stock has bounced between 20 years and 25 years for the past decade.

There are numerous reasons why homeowners in Orange County and across the nation are opting to stay put. After feeling the burn from the Great Recession, many are turning their homes into “Forever Homes.” Most homeowners have refinanced to historically low interest rates, some as low as the mid-twos, making moving a lot more challenging as rates eventually rise. Most baby boomers plan on staying put instead of downsizing after retirement. They are not moving like many had originally anticipated. They have been selling at a much slower pace than prior generations. This may be due to a longer life expectancy and a healthier lifestyle. They are happy just aging in place. And builders have not been building homes in the lower price ranges like they did in prior decades. These factors combined have contributed to the low turnover rate in the housing stock.

Buyers must understand that the low turnover rate in the housing stock is here to stay. The pandemic did not help the issue either. This trend is here to stay, which means that the anemic inventory is not going to change much for the rest of the year and into 2022 as well. Most homeowners are simply content with staying put. As a buyer, waiting for a lot more choices is futile. Buyers that opt to wait will be kicking themselves down the road. Instead, cashing in on today’s historically low rates now is the right move. The housing market has the legs to continue at its current trajectory for quite some time.

 

I take pride in going above and beyond expectations and know that it is one element that has made me successful. When I meet with new clients, I explain the current market in an effort to set realistic expectations, however, I also keep the mindset that anything is possible and you never know unless you try.

Who says you can’t get your offer accepted contingent upon selling your home when your home is not yet even on the market? I recently sat down with clients who wanted to sell but not move until they found their replacement property. Today’s market can offer a seller a month or two of rent back to find a new home but if you don’t find a new home you must have a Plan B. These particular sellers didn’t want a plan B; if they didn’t find a property while selling, they were not going to move. The challenge was set. I needed to do everything possible even if there was a 99% chance today’s market wouldn’t allow for it. I informed my clients of the high probability that a seller would not accept a contingent offer unless they had closed escrow on their home, small chance if their home was in escrow and furthermore a 99% chance they wouldn’t look at your offer if your home was not yet listed.

Although I informed my clients of what to expect, I was going to give it my all because you just never know and I always remain optimistic. Weeks later a home in Coto de Caza hit the market that was everything they ever wanted on a rare 15,000 sq. ft. lot. We made an offer and I structured it with the best of terms possible while providing impressive stats and comps to prove my case - that even though their home was not on the market I could guarantee it would sell in 2 days based on the area and demand for their home. We received an opportunity at a multiple counter competing with 2 other offers and in the end the sellers selected my clients' offer contingent that we would open escrow on their home in the next 5 days. We did exactly that. We received multiple offers on their home and secured a buyer who could close in 14 days allowing them to close escrow on their dream Coto property in 30 days. This was very unexpected but it took a lot of work to not only send a great offer on all terms but give it my all by structuring it in a way to win the home. While this success story is a rarity the pleasure to make that happen for my clients was extremely rewarding.

Across the U.S., the number of people making moves that they defined as permanent was up a modest 3% between March 2020 and February 2021. Even with that increase, national migration rates are likely still at historic lows. But zoom in to a few of America’s densest and most expensive metro regions and the picture is more dramatic, with the percentage increase in moves well into the double digits. Read the full article here.