You just keep hearing that we have an inventory crisis. People aren’t listing their house. We have no supply. I decided a few weeks ago to try to quantify that. Are people really not listing their homes? If so, how many homes on the market will help? It’s hard to go to folks with a perceived need but not know how great the need is. What I found was interesting. Take a look at the numbers from the past 11 years. These are total closings YTD as of March 16. I also included our
current pending sales just for good measure. This is all single family residential, at all price points in Rutherford County.
2021–YTD closed 1159, currently 172 active not under contract, 218 under contract showing, 1139 under contract not showing
2020–YTD closed 1058
As you can see, supply (inventory) is BOOMING. We have tons of houses in the market compared to even 5 years ago.
So why continue to market this as a supply issue? I think that takes the pressure off of buyer’s agents. We now have a common bad guy—sellers. Sellers are raising their price. Sellers are holding off on listing. Us against them. The reality is, sellers are selling a much higher rate than even 5 years ago. The real issue is competition on the BUYING side. Our demand has way outpaced our supply boom. What’s really crazy is that based on simple economic “common sense” (price goes up, demand goes down), this makes no sense. As an aggregate, we are
seeing price increases year over year more than 10%. So how does this change in perception help? I think it helps us set realistic expectations. No longer are we competing with the seller. The seller is waiting for the best offer. We are competing with a glut of buyers. We have to be as attractive and “easy” as possible to make it easy for the seller to say yes. Our team has been developing a strategy for this for quite some time. Much of the strategy is presentation and preparation. Only some of it is pricing. I’d love a chance to discuss with you. The right time to buy is when it is the right time for you. You basically can’t time the market. If you try, you will likely miss out on your best window. Let’s grab coffee and talk through it.
New Construction Market Update
As Jonathan has pointed out, the supply of homes really is not our issue at hand. There is a lot of inventory hitting the market, we just have more buyers than the supply chain can handle. Typically new construction homes have been able to fill the void when buyers were looking for a specific geographic area, a home with no need to upgrade, no time line to hit, etc. New construction also kept you out of the multiple offer situation so many buyers find nerve-racking. As Covid restrictions closed or restricted facilities that manufacturer home building products like lumber, windows, doors, roofing, circuit breakers and the hundreds of other products that go into the building process, we started first to see long lead times and drastic price surges. One of the hardest hit industries was lumber. It takes a set amount of time to take a freshly cut tree and turn it in to something usable on the job site. Using this as just one example, we saw the price jump from $300/1000 board feet to north of $1000/1000 board feet by mid-summer 2020. Now the building season in most of the country generally runs from late March through early November with mills seeing their highest demand during this period and they have a chance to catch up on inventory levels during the rest of the year. However, 2020 was an exception to this trend and the building season never really ceased and with rapidly dwindling inventory on the ground, home builders were about to receive massive price increases. On top of this issue, we are now going to pile on another, rising petroleum prices. You may not realize that many of the products used to build a house have this as a raw material; windows, doors, shingles, sealants, adhesives, just to name a few. We also now must factor in increasing shipping costs to get those products from manufacturing facilities to distribution outlets across the country. Home builders started to get hit from every direction with material cost increases that eventually became untenable to manage and estimate finished costs. As a pivot to continue doing business, many local builders are now going to wait to list available homes until the house is ‘dried in’, meaning the structure is framed, roof is on, and windows and doors installed. Others began to use price escalation clauses in order to pass on increases directly to the home buyer which can really make the process uncomfortable. There are so many moving pieces here, it can be overwhelming for those of you in the market for a new build. We have relationships in place to help stay abreast of coming changes, so if you would like more information or have questions never hesitate to reach out.