But I Still Haven’t Found What I’m Looking For
When Bono plaintively sang, “I have climbed the highest mountains/I have run through the fields” he was most likely NOT talking about trying to buy a house. Although for many buyers in today’s market, those words have an eerie familiarity.
For many months now, it feels like buyers have been roaming the streets, pre-approval letters in hand, waiting to see a new “For Sale” sign go up in someone’s yard. And the minute a decent new listing comes on the market, rushing like Beatles fans to get in the door. If you know anyone trying to buy a home right now, ask them if this is how it feels.
For further context, consider this. I’m writing this on a Monday morning. Taking a quick scan of the real estate activity over the past 3 days, here’s what has happened since Friday: 19 homes came on the market, 23 homes went under contract and an additional 18 homes closed. And that’s not unusual.
I have used the retail example before, but it bears repeating. Let’s say you own a store, and in your store, you sell watches. And currently in your display cases there are 25 watches. Imagine if every day, a delivery arrives with 25 more watches. But at the same time, business is booming and every day you sell 30 watches. At that pace, every single day your inventory drops by 5 watches. Which means unless something changes, you’ll be sold out in 5 or 6 days.
The next thing that starts happening is folks show up before you open the store. They get in line early. They find out what time the delivery guy arrives, and they meet him before he even gets to your door. The watches are in high demand, but your supplier can’t keep up.
As of this writing, there are 215 homes currently on the market in Lynchburg City. In the past 30 days, 104 homes have closed. If buying continues at that pace, we will have sold out those 215 homes in 62 days. In Forest right now, there are 148 homes on the market, and 37 have sold in the past 30 days. That works out to exactly 4 months’ supply in that community.
(Side note: I often explain to seller clients that a 6-month supply is considered very balanced. That doesn’t necessarily mean it takes 6 months to sell every home. It means that in any given 6-month period, the inventory is turning over nicely. This is considered a healthy balance between a buyers’ market and a sellers’ market.)
As the inventory creeps above 6 months, it becomes more and more of a buyer’s market. The further it goes below that 6-month mark, the more it becomes a seller’s market. And for a while now we’ve been sliding further and further into that range.
Here’s a good contrasting example. While single family homes in Forest currently sit at a 4-month supply, land is a different story. If you have a lot for sale in Forest, you know what I mean. As of this writing, there are 126 active land listings in the 24551 zip code. Any guesses as to how many land listings sold in the past 30 days? Past 60 days? Past year?
In the previous 30 days, 4 such listings have sold, which would put land listings in 24551 at a 31.5-month supply. In the past 60 days there were 10 sales, which would move the needle a little bit—to a 25.2 month-supply. But going back to one year ago today, there have been 47 total sales. At that rate, it will take 2.7 years to sell off all those properties!
Think of it this way: next door to your watch shop is another store, and they sell pagers and Walkman CD players. Lots of inventory, not much demand. They don’t need more deliveries, and no one is arriving early to be the first one in the door. (In fact, those 47 land listings that sold—they were on the market an average of 603 days!).
Isn’t it fascinating that in one segment of our market there’s strong demand, but in a different segment (in the same town, no less) the very opposite is true? Which means the strategies employed by both buyers and sellers must be flexible and responsive to the market conditions. This is true in any market, but even more important to focus on in the extremes. And for now, that seems to be where we find ourselves.
Final thought: buyers, don’t despair. Don’t be like Bono and go off holding the hand of the devil (whatever that means). The right home is out there, and you’ll find it.