What Low Inventory Means for Buyers and Sellers

The real estate market is alive and well! The multiple offers we are seeing on so many listings is proof of that. With resurgence in our market comes a rapid decline in inventory. One of my clients recently reported that they had over 50 groups in their open house and that they expected over 10 offers on this property. I am hearing this kind of scenario all day long.

Multiple offers are now as common as foreclosures and short sales used to be.

So what does this mean for buyers and sellers? Should sellers line up to sell to take advantage of this? Should buyers sit at home and wait until the crowds die down? That entirely depends on the motivation of both the buyer and seller and their particular reason for buying or selling.

Typically in a low inventory market this means that a seller will sell their home for more AND a buyer will pay more. Does this mean then that a buyer shouldn’t be buying right now? ABSOLUTELY NOT! With the current interest rates hovering around an all-time low it is absolutely still a fantastic time to buy real estate. And while most buyers might cringe at the price they may have to pay if competing in a multiple offer situation, they could possible cringe more if they waited to buy and interest rates went up.

In a market like we have now both buyers and sellers have to look very closely at the pros and cons of being in the market now. A seller might ask why would they want to list now if the inventory is so low. Doesn’t that mean house prices would go up because of the lack of inventory? While this seems like a good assumption there are many variables that make that kind of speculating just that … speculation. Nobody knows for sure what the interest rates are going to do tomorrow, so sellers and buyers need to look at their particular situations very carefully.

If a seller needs to sell but they want to hold off in the event inventory gets any lower they may also be holding off long enough to see an increase in interest rates which could cause the buyer pool to diminish. The question becomes whether or not that seller wants to speculate or if they want to be in the market as it is today. A “sure thing” today may not get sellers a speculated increase tomorrow. Perhaps the stars will align tomorrow, but today’s market it is a sure thing. Sellers and buyers must look at an analysis of what it looks like to buy or sell today and what it could look like to buy or sell in the future – looking at how differing market conditions (such as changing interest rates and inventory) might affect the market for that property.

Buyers need to know that we are still at an all-time high affordability rate and we have historically low interest rates. While they may be paying higher than they wanted if they have to compete in a multiple offer situation, what they save with the low interest rate will quickly make up for that over time.

Sellers need to know that while the market seems to be in their favor right now it does not mean that this is going to last forever … or things could improve even more. The decision to sell needs to be about more than just speculation and playing the market.

Ultimately both buyers and sellers are winning right now in what appears to be the perfect storm for both buyers and sellers. As an agent giving advice, present the facts about the market now and help paint a picture of a future with a number of scenarios so buyers and sellers can check their tolerance for risk and make a decision.