A question of supply
When I wrote about overpricing, I made these general statements, based on what I am seeing around Boston:
…demand has not dried up and the shadow supply has not swamped the inventory, leading to rapid price drops. So there is a market full of buyers who are spending what the market is still bearing, in order to get a house that suits them.
Ehwhy questioned:
If demand has not dried up why are sales down?
Sales are down because inventory is down. Anecdotally, I would say that demand is as high this year as last, but good inventory is low in my area right around Boston. If you want a house with a view of I-95, there are some nice houses to be had, at a relatively low price. But, if you want a house to stay in long enough to make it worth your effort, the pickings are slim. The inventory is clogged with houses that are either overpriced, in need of huge upgrades, tiny, or poorly located. The ones that are well priced and worthy of living in are being sold quickly. Kihon1 bears witness to this:
kihon1 wrote:
I've been looking for a house for the past five months… I've seen gems of houses going for very little money, but in bad locations. I've seen other, similar houses, with water, mold, vermin, and HOLES in the walls, going for 100K over the nicer house…… I also understand that if I buy a house that I settled for, I won't be happy in it. This is a big investment to be unhappy with in the long run. So I'll keep looking for the right house at the right price in the right area. And sellers should understand, there's plenty of potential buyers out there who are just like me.
So, to answer Ehwhy, there is lots of demand. There is an inventory shortage, when you only count solid properties in good locations.
Many buyers are acting like Kihon1. They are not going to jump at any old, falling apart house. They are not going to live in a house where they can’t hear themselves talk in the backyard. They are not going to cram into a starter home and wait for the market to start escalating again. Bravo!
There are also buyers who have a compelling reason to buy. These buyers are in a position where they are choosing to compromise, either with a too-high price or a deficient property in some way. The compromises seem deeper this year, to me.
Are you compelled by circumstance to buy this year? Have you been in bidding wars? Or are you like Kihon1?
