The number of homes for sale continues to dwindle across the nation, and the pace is especially rapid in California.
Across California’s largest metros, inventory for sale in May 2017 compared to a year earlier was:
- 29% lower in San Jose;
- 25% lower in San Diego;
- 20% lower in San Francisco;
- 18% lower in Riverside;
- 15% lower in Bakersfield;
- 14% lower in Sacramento;
- 12% lower in Los Angeles and Orange County; and
- 3% lower in Fresno.
San Jose experienced one of the steepest inventory drops in the nation. Here, home inventory for sale was 29% below a year earlier as of May 2017. Compare this to the national average, which was still a significant drop of 9% from a year earlier, according to Zillow. The only major metro area in California with a below average inventory loss was Fresno, which saw only 3% fewer homes for sale in May 2017.
Relative to the 2011 inventory peak, there are 43% less — about one million fewer homes — for sale nationwide. Much of the decrease of the past few years was due to the flushing out of foreclosures, real estate owned properties and short sales. Still, 2017 inventory is particularly low.
Breaking the inventory cycle
Low inventory occurs when homebuyer demand exceeds homes listed for sale.
In 2017, insufficient listings can be blamed on a number of factors.
- Not enough new construction. Residential construction is stuck at a fraction of what it needs to be to keep up with California’s rising population and demand. Multi-family construction has actually decreased over the past year, while single family residential (SFR) construction is rising marginally.
- Would-be sellers. Homeowners who may otherwise have listed their homes for sale are increasingly choosing to hold off in fear of not finding a replacement home due to (ironically) low home inventory.
- The type of inventory available. Almost half of California’s for-sale inventory is in the high tier. Therefore, of the inventory available, very few homes are within reach of most first-time homebuyers, where demand is highest.
While undoubtedly difficult for homebuyers, lower inventory has also been hard on agents, who now have fewer fees to go around.
Inventive agents will up their FARM or marketing efforts, reaching out to potential sellers in nearby neighborhoods. Encourage potential sellers by informing them about the likelihood of higher interest rates later in 2017, and by the probability that their home will go quickly and at a competitive price due to the low inventory situation.
2017 is a seller’s market, and sellers ought to be taking advantage.