Hi there, everyone. Hope you are doing well today.
Fair warning….This might be my wonkiest blog post of all time. If you aren’t keen on charts and statistics, I’ll catch you on the next blog post and hope you have a great day!
For those of you that stuck around…..here we go!
Looking at the full month of September fast stats, the months of supply is still deep in seller’s market territory and the inventory (active properties on the market) is again lower when compared to the previous year at this time. What’s new, right? We’re in a seller’s market.
This lower KC Metro inventory (properties for sale), coupled with a consistent demand, is causing these tremendous gains in sale prices, lower days on the market, and a race for buyers to get under contract rivaled only by the Oklahoma Land Rush of 1889.
I’m so used to seeing that downward arrow on inventory on the monthly updates, I wondered when was the last time we saw an increase or even holding the line? That began my search for “10 years of Septembers” in our KC housing market.
The top chart on this blog post shows 16.7% less housing inventory than the previous September. They are combining new and existing homes to get that figure. That’s fine for a quick glance, but I researched those two groups independently to get a better idea of how they have looked over the past decade. This chart shows that almost every month of September Fast Stats indicated a decrease in inventory when compared to the same month/previous year.
Between 2007 and 2009, both new and existing home inventory was on the decline….no shock considering we were in a housing crisis at the time. Sellers didn’t want to sell at lower prices and credit was drying up for new construction projects. Except for a jump on existing home inventory in 2010, we continued to lose ground year over year until 2014. I’m speculating that the bump on existing home inventory in 2010 included sellers that could no longer wait for prices to increase before they had to sell plus the short sale/foreclosure inventory flooding our KC market at that time.
By 2013 and 2014, existing home inventories had lowered to the level of home buyer demand — a neutral market not really favoring the buyers or the sellers. Wow, did things change from 2015-2017. Existing home inventory just kept right on dropping and that, coupled with a home buyer demand that didn’t let up? Welcome to the seller’s market.
The chart below makes the point a different way. Instead of percentage changes, it shows the number of homes for sale. Notice the almost continuous reduction from 2011 to present.
So why have existing home inventories continued to drop? Simply put, “why do we have fewer owners selling in our metro?” It isn’t valuation. Seller’s could enjoy tremendous sale prices on their properties so this isn’t a waiting game on a better market. Is it the economy? Fewer homeowners need to sell just to capture a profit. Are investors holding up the inventory they purchased during the slump? Could be a contributor. The chart below shows sales on investment properties. They are trending up as many are wanting to take their profits, but we don’t know how much investor inventory is still out there. I’m suspicious that there is much more particularly since large syndicates of investors have discovered that the KC Metro is a great place.
I don’t want to paint a picture that lower inventory alone makes a seller’s market. It’s always coupled with the demand. Changes in demand would be impacted by unemployment or hints of big companies moving out-of-town, interest rate increases, down payment assistance availability, etc. Since we aren’t seeing any of those types of signs that would put the brakes on home buyers, the only way this market will even out (in the short-term) is additional inventory.
So why does all of this even matter to Domicile One Realty? We work with a great number of first time home buyers and this is a rough market for clients to purchase in. I would love to give them some light at the end of the tunnel so I’m searching for trends that might point to signs of a change. It’s impossible to pick the top or bottom of the market, but I am diligently searching for that inflection point/that 4-6 months where our inventory is even or above that of a previous year. If we can string a few of these together, we might be looking at the beginning of a change. Believe me, if I see it, I’ll write it up in what I’m sure will be the 2nd wonkiest blog post I’ve ever written. I’m attending a residential real estate forecast event next week and I’ll make sure to post what we learn as well.
Thanks for hanging in with me on this post and take care,
Terry Jackson | Domicile One Realty | www.DomicileOne.com | 913-488-5623