Housing Recovery and Inventory Shortage

Market Inventory - Provided by MPLS Area Association of REALTORS

Wow, I have not posted here in a long time.  Consider this my formal vow to pay more attention to this blog!

As many of you know, real estate has been through a tough decade.  We saw enormous price gains from 2001 through 2008, unlike anything seen before.  Unfortunately, this was subsequently followed by massive price drops, high levels of foreclosures, and a market in complete distress.

It now appears that we are emerging from the depths of the real estate collapse.  And that is fairly positive news for everyone involved - buyers, sellers, loan officers, real estate agents, local communities, etc..  Normalcy (whatever that means) is something we've been seeking for quite some time now.

However, the recovery happening in the market is not all positive news.  Four years ago, there were more houses for sale than buyers knew what to do with.  Buyers had roughly 10 months worth of inventory to look at (10 months of inventory means that if there suddenly zero homes coming on the market for sale, it would take 10 months for all the existing inventory to sell).  Today, that number sits at a paltry 3.8 months.  Essentially, we've gone from one unhealthy extreme (way too much inventory) to the opposite (way too little inventory).  This has created a lot of pressure within the market, and as a result home prices are up roughly 10% compared to a year ago.

What we ultimately need is more home sellers to list their homes.  It is easy to see why sellers are still reluctant.  Just five years ago they though their homes were worth significantly more.  My (speculative) theory is that the lingering effects of the bubble/burst are still present in many sellers minds, and they have simply come to grips with the idea of staying put for the time being.

This summer will be a very important indicator of where the market is headed.  If sellers do decide to come off the fence and list their homes, buyers will be reinvigorated by more inventory to look at.  Stay tuned for a follow up post in the next few months as more data becomes available.

And as always, please feel free to contact me if you are curious what your home is worth.  I would be more than happy to prepare a market analysis for your home!