Low Inventory

Low Inventory:
It’s a seasonal thing – around November the number of homes for sale starts dropping as people let their listings expire, and those contemplating selling don’t put them on the market until after the holidays. And we usually see a bump up in inventory in late January and February. Except this year we didn’t.
There are still fewer homes for sale than normal in the entry levels, and this means higher prices as sellers see they have no competition. And buyers will face added competition as they compete for the few homes available.
“Entry level” means homes under $300K in nice neighborhoods in Oceanside, or under $150K in a 55+ community, for example. Anything that rents for a 6% return will have investors making offers on that property, and some of them will make cash offers. That makes it tough for someone wanting to buy a house with a loan, especially a low down payment loan. Why? Because sellers will often choose the offer that is most certain to close escrow, and having a low down payment loan adds to the risk that the sale might not go through.
Well what if you raise the price above the cash offers? Wouldn’t the seller take on the risk of the loan not going through if they got a high enough price? Ironically, the higher the price, the more likely the loan will NOT go through because the lender will do an appraisal on the property and appraisers these days tend to be conservative. That means banks tend to appraise homes lower rather than higher in order to reduce the risk to the bank. So your high offer will most likely fail because the home won’t appraise at that price.
So what’s a home buyer to do? There are some strategies we’ve used to help combat this, but they are not for everyone and each person’s situation is different. If you want to hear about some ideas that might work for you, just give me a call.