Inventory
By Charles TurnerAt our company-wide meeting someone said that if Realtors dropped the listings that they had that won’t sell, the inventory “problem” would go away. Let’s look at that. A lot has been said on this blog that you have to have a willing and able buyer. It’s true for the seller too. Maybe the cost of putting your home on the market is too low, basicly there is no cost. Nobody gets paid until it closes and if it is overpriced or trashed, it won’t get shown much so it won’t be too interuptive? It only takes one buyer as the saying goes.
Realtors are often too eager to take on any listing that will get a sign up. Some of it is pure greed- get your listing then beat you up for price drops until it eventually sells. Other times, and more honestly, the market just isn’t what it used to be and regardless of the effort put into marketing it, the price has to come down to compete. At some point, the seller may become unwilling even though the home is still on the market. The slowing market has brought a lot of sellers closer to the zero equity point. The two conversations that we have been having lately is that sellers may want to consider pulling it off the market and renting it out if they can’t get what they need out of the property at this point. The other is considering price drops. We use the data collected from our Internet marketing to show that the property is being seen but they are not converting to people walking through the doors. Just because a seller was willing and able when the property was listed doesn’t mean they are today.
If each licensed Realtor in RMLS canceled one listing, inventory would drop overnight by roughly 1/4th…
This idea of realtors lowering their inventory just to keep prices jacked up seems so sleezy.
Is a listing that no longer has a willing and able seller a listing that should show as inventory?
Removing listings that aren’t selling is a fine idea. While it would reduce inventory and day-on-market averages it would not necessarily stem price declines. If anything it might quicken them.
And those who can’t get their asking price may be in for a rude awakening when they try to rent to cover their mortgage. As Charles pointed out several posts ago, “No doubt that, at least today, a renter can get a nicer place for less cash-out-of-pocket monthly that they can buy.”
Why do sellers keep things on the market they are not still willing to sell? I am currently trying to buy a home and have run into this where sellers will not let you in to see their house that is supposedly for sale.
We wrote and offer 9% below the current listing price on a house this week that we could justify on paper as not being an unreasonable offer. Seller refused to even reject the offer. Just acknowledged that he was going to ignore it. By the way: at any price is a seller obligated to sell.
Could one argue that every property is inventory? I bet I could get 99.9% of owners to sell at the right price. Zillow kind of heads that way with the “Make me move” option.
Chicken and egg. The inventory is up because prices are too high in the absence of barely-legal loans. And the speculators are gone too.
Nothing is going to bring back the heady days of 2005. We’re looking at a long slide down. The sellers might be able to ignore lowball offers now but in a year or two they’ll take what they can get.
But the inventory we have now is what we have. You can’t just wish away some percentage of the inventory by saying that some of those sellers suddenly aren’t serious. What about in 2005 – were sellers more serious then? No, but there were lots of very serious buyers then. Now not so many.
Many of these current sellers will eventually get serious when the realize that their fantasy prices aren’t going to result in a sold home and when they realize that they can only survive so long with negative cash flow. There are sellers that have to sell: they’ve been transferred, they bought another house before selling their current one, there’s been a divorce, etc. People in those kinds of categories will get more realistic as they get more desperate.
Is there a difference between “serious” and “willing and able?” An accurately priced home will sell in any market. An under priced home will sell with multiple offers and potentially over asking price. An over priced home is over priced in any market.
Seller may have been serious about selling when the sign went up but after six months and some price reductions still willing and able? Not everyone can say yes. Selling now may be less appealing even though the house is still listed. Maybe we should be looking at a ratio of inventory to canceled/expired listings that weren’t renewed between 2005 and now (I have no idea how to do that). Point being that a large percentage of todays inventory won’t sell. Attrition should have a downward impact on today’s inventory in the coming months. It has nothing to do with wishing those listings away.
And TiP is right, but to add to serious sellers in this market, there are serious buyers. Will you guys let me post as to why it is a good time to buy without ripping my head off? The reasons are situational, not universal.
Any house can sell in a day – it’s just a matter of price.
Is inventory that’s priced too high still inventory ?
Sure.
Should it be delisted ?
Probably not – it’s still inventory – no matter how overpriced.
Inventory that refuses an offer that can be demonstrated as “reasonable” is probably either dreaming of a dumb Californian or a foreclosure waiting to happen and unable to take “reasonable” as they are underwater.
For realtors it’s probably best to get sellers reasonable and dealing ASAP as they earn their living on turnover – no matter what the price.
Sellers are probably better off selling for 5-10% below comps rather than chase the market down for another year.
Personally I think that very few buyers are in a position where buying right now is the right thing to do – but as our host points out, there are probably some out there for which it makes sense.
Attrition will reduce inventory only if more houses don’t go up for sale. That’s unlikely. Some/most people who list have to.
I can’t imagine what rationale someone might have for why now is a good time to buy but I will politely listen. Isn’t there something about catching a falling knife?
I would love to hear both arguments for and against buying right now.