Low Inventory is causing all kinds of issues throughout the real estate market. 2020 is setting up to be a very interesting year in real estate in the Forsyth County, Winston-Salem market. As of February 2020, we see a record-low number of homes for sale. Active homes for sale under the $300,000 price range are down almost 11% this year compared to last year. This reduction in inventory is causing problems which we have experienced first hand at Saunders Realty. We listed three houses within the last week that were under the $150,000 price range. All of the houses had 8-10 showings within 12 hours and multiple offers within 24 hours. One house had a full price offer within three hours! Full-price offers might sound like a fantastic problem to have if you are a seller, but it is creating other significant issues in the local real estate market.
Issues for buyers: The most apparent problems are for buyers. If you are a buyer in the $300,000 or less price range, good luck finding a home. At the end of January, in all of Forsyth County, there were 597 homes on the market under $300,000. That is down almost 11% from the same time last year. If you are looking for a home between $100,000 to $200,000, there are only 268 homes on the market. That is down 18% from the same time last year. High demand and low supply are increasing home values faster than expected. Many buyers are having to rush to make an offer and go in over asking price to be competitive with other offers on the same property. Multiple offers also make it much harder for the buyer to get much-needed funds from the seller to cover the closing cost for them. On top of that, appraisers are having a hard time finding comparables to support the purchase price even though multiple offers are pushing the price up. If a loan is involved with the purchase of the property, the loan might fall apart due to not being able to appraise for the higher purchase price. Lack of comparables puts the seller in a spot where they might have to accept less on their home. Issues for Sellers: You would think this current market is great for sellers, but it is causing some significant problems as well. Because of the record low inventory of homes, sellers are having a tough time finding their next home once their house goes under contract. That is keeping many sellers from putting their houses on the market, which adds to the inventory issue. I can't tell you how many times a week I hear from a potential seller, "Mark, I would like to sell, but what am I going to buy once my house goes under contract?" Also, because there is no inventory, builders are having a hard time keeping up with demand. Many of them are months to a year out from being able to start on a new home, which adds to delays from sellers getting their house on the market.
The rental market is under pressure from two sides. Issues for the Rental Market: The rental market is under pressure from two sides, what I call bottom-up demand and top-down demand. The bottom-up demand is people that do not want to buy right now. Some of these people have been priced out of the real estate market due to increasing home values or they just can't find anything to buy. Top-down is from sellers that can and want to buy but can't find a home. These two factors have increased the number of renters and are pushing rental prices higher. Investors see this and are buying up both single-family homes as well as multi-family to rent out. Many of those investors are paying full retail prices for investment houses. These investors are buying houses with cash, which in multiple offer situations, makes it harder for first-time home buyers to compete. Cash offers mean they do not have to have an appraisal, so that removes an issue for sellers that I talked about earlier. Many sellers in this market will take a lower offer because it is cash and easier to close. These investors are removing inventory from the market, which is adding to the inventory problem. Where do we go from here? That is a great question! There are a few early indicators that I like to keep an eye on that show if the real estate market is starting to turn. One of those is days on market (DOM-how long it takes for a house to sell.) Right now, we have record low days on market. Another indicator is the inventory level. When we start seeing that number go up, you will start seeing a change in the real estate market from a seller's market to more of a natural market or maybe a buyers market. I do not see that changing anytime soon. Buyers need to be prepared to not see any significant changes soon. Every real estate market has winners and losers. Here is a break down of who, I see, are the winners and losers in our current real estate market. Winners: Sellers that do not have to buy after they sell. They will be able to sell for top dollar. Sellers that are looking to move up in price range. We see a softening in the real estate market over $400,000 sales price and more of a buyer's agent. For example, sellers looking to sell a $250,000 house and move up to a $500,000 house can do very well. Investors that would like to sell their investment house and do not have to buy another one. Both sellers and investors can sell for top dollar. Investors are seeing monthly rents going up. Neutral: Sellers that have to buy a house as soon as they sell but are in the same price range: They will be selling for top dollar but will be buying at top dollar as well. Losers: Buyers are paying top dollar for homes and seeing a meager number of homes to pick from with much competition. Investors that are looking to buy. They are having a tough time finding good deals that will produce a good return. Here's to a wild and crazy 2020 real estate year! Mark Saunders CEO Saunders Realty, LLC 336-939-6275 Mark@SrealtyNow.com www.SRealtyNow.com