Falling Inventory Stock is Troubling

DSNews.com, May 18th, 2017

The falling inventory has many industry professionals worried, especially as demand picks up. Inventory had fallen seven percent in March, according to the National Association of Realtors, a trend that continued into April.

“The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out—it’s affecting our business; it’s limiting our sales,” said Redfin CEO Glenn Kelman, on CNBC. “We’re going to be fine in terms of market share, but I think the overall industry for the first time is seeing sales volume really limited by the inventory crunch.”

Data from Redfin shows that homes in April sold the fastest since 2010, and sold 10 days faster than a year previously. Many homes, one in four, sold above their list price. Kelman puts the blame partially on an unwillingness to sell, as many homeonwers choose to rent out their home to keep their mortgage instead.

“It’s a new landlord nation where everybody is renting out their basement. When somebody moves up they don’t sell their old place, they rent it out to somebody else, and it’s because they want to keep that 30-year mortgage for 30 years, and it’s because they can easily find somebody on Airbnb who will take the place,” Kelman said.

Additionally, home prices have continued to rise, though Kelman states that “it’s not a bubble.” According to CNBC, Kelman blames the inventory problem on a lack of construction, as homebuilders are building 18 percent fewer homes than the 25-year average. “Cranes fill the sky in every town, but they’re building office buildings,” he said. Kelman noted that employment may be rising, but the lack of homes does not fall in line with this trend

According to Kelman, homebuilders are opting to build apartment complexes instead of single family homes, citing tight credit keeping buyers off the market. “There is so much demand in terms of rent that it doesn’t make sense to build properties for sale.”

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