What happens when there are no homes to sell? Seriously, have you ever stopped to consider what would happen if there were literally no homes to sell and no homes to buy? It seems ludicrous to even think about such a phenomenon, yet with every week our inventory is getting smaller and smaller and smaller. In the Conejo Valley where I live and sell, our inventory last week hit an almost nonexistent 434 total units. Today, just one week to the day later, our inventory is at 413, a 5% drop in one week. In fact our inventory is half of what it was this time last year and a third of what it was two and a half years ago.
Saturday I was showing a sweet couple relocating from Kansas City. They work for a company headquartered here. We looked at 12 homes (that’s all there was not backing a busy road, freeway or other some-such location issue) in 5 cities within and around this, the Conejo Valley. Their criteria was pretty broad; 4 beds, 2 baths, almost any size, any age, fixing would be OK, priced from $450-625,000. I showed them up to $650,000. Each home we visited was crummier than the next. There was one beautiful home just outside of the Conejo Valley in neighboring Moorpark that came up on Thursday; an elegant 2600 SF one story listed at $600,000. We looked even though it would add an additional 20 minutes to the husband’s already 20-25 minute commute. When we arrived Saturday morning it already had 2 offers, both full price and one was all cash. Later we saw a home in Agoura Hills, part of the Conejo Valley, not yet on the market that is listed with one of the agents in my office, so were lucky and able to get in early. It was at the “just beyond the upper limit” of my client’s price range. It was a decent home, good location but needed $10,000’s worth of repair and updating. It was virtually the same home as the day the owner bought it in 1982. At the asking price, there just wouldn’t be any money to fix up the darn place.
And are you ready for this? We actually had to stand in line in the blazing sun, that’s right in line, with 5 other Realtors and their clients, to get into a newly listed short sale property in Thousand Oaks, priced at $600,000. It was 2000 square feet, really clean and with some nice upgrades and even had a pool. It was in one of the top elementary school boundaries; on a slightly busy corner but also on a cul de sac. Suffice to say it was a nice home; not earth shattering but very nice. However, it’s a flippin’ short sale! In other words, we would have to jump into a bidding war for a chance at something that may or may not ever come to fruition. And even if it does, my clients will be here in 30 days and can’t wait 4 months with a baby and a 2 year old for a short sale to close.
Thus we began looking for a $3,000+ a month rental. We found one built in 1959 with a great yard, some freeway noise but no air conditioning… yikes! But they would consider a 6 month lease. We found another that had had a water leak so the bamboo floors were buckling… just lovely. We found a third that smelled like dog pee. There was a real beauty at $3,300 a month… my listing, but the landlord wants a year minimum.
As my clients looked to me to provide guidance and an opinion on buying vs. renting, all I could say was that more homes traditionally come on the market as we get into the fall. However I said, every indication was that because the market is so tight and that there is so little inventory, prices were likely to spike. Would the spike be sustainable, who knows? A year lease could spell disaster for someone flirting with the edge of affordability. They flew back this morning without a home to move to.
So that leads me to today’s question, “what happens if there are no homes to sell?” The answer is prices are going to sky rocket. So naturally sellers are going to rush in and list today to take advantage of the rise in prices, right? Well maybe, but maybe they choose to wait for even higher prices, further crimping an already desperate dearth of homes for sale. So there you have it. At the current absorption rate of -5% a week, in less than 20 weeks we will be out of homes. I don’t know what the Realtors in your neighborhood think, but this one is starting to worry.