Why is there no inventory? We hear there is no housing inventory and has not been any housing inventory for a few years now. So why?
First, let’s look at some numbers. There are three types of markets. A seller’s market is roughly understood as there are less than three months of inventory available on the market for sale, so if the house is priced right and looks great then they often have an advantage because there are likely many buyers who will be interested in their house. When the market gets over 6-months of inventory, then the buyer often has the advantage. And between 3-6 months is more of a neutral or balanced market.
Another number we look at is active listings. In the Phoneix market, we consider about 30-35k listings to be about a balanced market. Today there are less than 20,000. In Chandler, we have under 800 active and pending where a balanced number is usually closer to 1200.
So there are the numbers, now why is this the case.
I am going to use an example here from a client of mine who was considering moving. He purchased his 2,000 square foot house in for just under 175,000 in 2011. His current interest rate on that house is 3.5% and his monthly total payment is right at about $1,000 a month.
He contacted me saying he was thinking about moving to a slightly nicer neighborhood. We ran some numbers. If he put 20% down he was still looking at a mortgage just north of $300,000. If he got a 4.6% interest rate, which may sound high compared to his previous rate, but it is still low when you consider historic norms. His total payment was going to be around $1650. His monthly house payment was going to jump over $650 a month.
This is the reality that many homeowners who purchased between 2010 and 2014 are facing. To this former client, the extra $650/mo was not worth the house he was getting. With upgrades to his house, it was worth it stay where he was and put away those extra savings.
Originally posted on Phoenix Real Estate Guy. If you are reading this anywhere but inside your RSS feed reader or your email client, the site you are on is guilty of stealing content.
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