For the past few years, consumers could take their time searching for their dream home. There was no sense of urgency, as well-qualified buyers had their pick of the litter, while sellers who had to sell were at a huge disadvantage. That was then.
Today, the inventory of unsold homes in the Denver area is at a 12-year low, while contracts and closings have increased by double-digits. In March, there were only 10,325 unsold homes on the market, a 41.7 percent drop from the 17,707 a year earlier. Contracts, meanwhile, were up 49.2 percent from March 2011.
The low inventory and strong demand is causing a sea change in the market and is a timely starting off point for the monthly conversation between Lane Hornung and John Rebchook of InsideRealEstateNews.com. Hornung is co-founder, CEO and president of 8z Real Estate and COhomefinder.com.
John: Lane, do you think a lot of consumers think the low inventory number is more real estate-agent hype than reality?
Lane: It’s a little like the boy who cried wolf. I think the public is justifiably skeptical of positions that are seem to be taken to create a sense of urgency, so there is some skepticism. That can be frustrating for the real estate professional who believes in telling it like it is.
John: While the overall supply is down that is not true across the board, is it?
Lane: Adding to the confusion is that it is still a bifurcated market. There a some price points and some geographic locations that have an acute lack of inventory. There are other price segments and geographies where there is still an unbelievable over-supply.
John: In other words, all real estate is local.
Lane: The other piece of the puzzle that complicates matters is that a lot of people glean their market data from newspaper stories based on market trends. Denver and Boulder were starting to see a shortage of homes in some price ranges when there was still a glut of homes available nationally.What is interesting now is that what clearly had been over-supply of inventory at the national level is now dropping.
John: How should a prospective buyers prepare themselves psychologically for a market where they may be out-bid?
Lane: That is a great question. What you are trying to avoid is a couple of things. No. 1, you want to try not to lose out on the home that is your best choice and the best fit. More typically, a buyer needs to be aware of the psychological pain of of being out-bid, two, three, four times or more. I say that is more typical than losing the best choice, because there are usually multiple choices to fill your housing needs. There is a real psychological and emotional cost of losing a home you wanted to buy. It’s an emotional roller coaster and not very fun. But once a buyer has gone through it a couple of times, they have a better understanding what it takes to close a deal in today’s market.
John: Another part of the psychological pain is sort of buyer’s remorse in reverse – the notion that they have already let the true deals slip through their fingers by not buying in 2010 or 2011.
Lane: One thought to keep in your mind that this market is having more of a U-shaped bottom than a short, spiking V-shaped market. We’re not talking about double-digit price increases over night. Whether you buy a home in March 2012 or August 2012, probably isn’t going to make much difference in terms of price, especially over the long-term.
John: So is there a sense of urgency among buyers?
Lane: There is certainly if for those on their third or fourth offer.
John: But how about among the non-buying public? During the go-go days, cashing on homes dominated the talk around the water cooler and at cocktail parties, even if you weren’t writing a check for a home.
Lane: That was a bubble mentality. That was a frothy market where people were motivated by a desire to flip properties as a sure-fire way to make a fortune. Today’s sense of urgency is much more grounded in reality and based on real living needs. The urgency is really methodical and not frenzied. Realtors love buyers today because they are very focused and they are very goal-oriented. They are acting from a much more solid basis.
John: Thanks, Lane.
Lane Hornung is the president, CEO and co-founder of 8z Real Estate and COhomefinder.com. 8z Real Estate is a sponsor of InsideRealEstateNews and a question-and-answer session is a monthly feature of IREN. To learn more about 8z and the neighborhoods its brokers serve, please visit this link.< class="related_post_title">Related Posts:>