NO HOUSING INVENTORY? Don’t Panic, We All Need Milk…
There is a recurring refrain I hear among my colleagues in Real Estate…
not just in my market area of Northern NJ, but throughout the country:
“OMG, there is no inventory, there is nothing to sell! If there are no good houses to sell, then buyers aren’t going to come buy homes in my market area. If it FEELS like half the amount of inventory, then are we going to only sell half as many houses? How can I expect to do my units when there isn’t anything to sell?”
There is that word…“FEELS…” That is quite a conclusion being assumed collectively over FEELINGS rather than FACT, and it may be time to see if this FEELING holds up to real statistics in a market area.
Inventory is down for sure…
As a matter of fact, according to the National Association of Realtors, “…the US is short 6.8 million homes…accounting for losses of existing homes and underproduction brings that total to 6.8 million homes.” Don’t forget, US builders were having difficulty getting funding for new construction during and even after the Great Recession, starting in 2007…and even now, builders are just beginning to really ramp up production for more housing to keep up with the rising US population’s demand for housing (check out US population grown from 2007-2020):
I, too, suspected that we were significantly down in sale numbers because “there just aren’t enough homes to sell, right?” Until I saw this incredibly surprising graphic:
This graphic depicts the number of TOTAL LISTED UNITS (RED) in the Garden State MLS (covers much of Northern NJ) in relation to the number of UNDER CONTRACT UNITS (BLUE) & SOLD UNITS (GREEN) for May of 2019, 2020 & 2021. As expected, there has been a marked decline in listed units from the last 3 years – as a matter of fact, it is almost shocking to see that only HALF the number of units came on this May as did 3 years ago (28410 units vs. 13949 units). But much to my delight, I was excited to see that the under contract/sold numbers are roughly equal (8032 in 2019 vs. 8165 in 2021)! That being said, had the COVID shutdown not happened spring of 2020, we likely would have had a similar performance in UC/S May of 2020.
How is this possible? Let’s talk about MILK…
If I ask my husband to stop and buy a gallon of milk on his way home from work, he has options of where to go. If he stops at a large grocery store like Kroger, he will likely have at least half a dozen brands in milk (regular, lactose, organic all found in several sizes) to choose from.
If he stops at Trader Joe’s, he likely only has 2 kinds to choose from (name-brand & the Trader Joe’s brand). If he swings by the gas station, it’s pretty much just one lonely white jug in the cooler. Regardless of where he stops, he returns with ONE JUG OF MILK BECAUSE WE MUST HAVE MILK. Not having milk is NOT AN OPTION.
And it is the same with housing – the Great Recession didn’t stop people from graduating school, finding jobs, getting married, having babies, outgrowing their rental apartments, and needing to find new homes. As a matter of fact, “…for many Americans, owning a home is an essential part of the American dream that conveys a number of economic benefits, such as the ability to accumulate wealth and access credit by building home equity, reduce housing costs through the mortgage interest deduction, and gain long-term savings over the cost of renting.” (https://www.huduser.gov/portal/pdredge/pdr-edge-frm-asst-sec-081318.html)
And while the May 2019 & 2020 Buyer who Closed or went Under Contract on a home had roughly 3.5 properties to choose from, the May 2021 Buyer had just shy of 2 houses on average to consider…and yet the same number of properties were taken off the market despite the amount of inventory available…because EVERY NEEDS A HOME. Like they need milk.
Given the number of Realtors who have stepped away from Buyers to pursue that ever-appealing goal of “getting all the listings,” this is an interesting time to lead generate for Buyers. Most Buyers out searching now HAVE to buy, so assuming you have a skill set to service them, there are opportunities to service these clients. Buyers are also a way to take market share in your area…and as those of us who’ve been around the block for a while, we all know…today’s Buyer is tomorrow’s Seller.