Generally speaking, yesterday’s market moved at a slower pace and the MLS was overloaded with homes for sale – many of them foreclosures or short sales. Prices adjusted downward and people seemed nervous to “buy into” an unstable market.
Today, however, there’s a sense of better times ahead. We’re seeing multiple-offer presentations and there are more buyers than homes available! Inventory is limited and it requires more work to find your buyer a home. The lesson here is: different markets require different approaches, strategies and skill sets.
How did we get here?
I (Joe) sell real estate in the Midwest – a region that’s usually last to feel an economic up or downturn. But our market is definitely starting to feel this inventory shortage. As I travel coast-to-coast talking to real estate agents, I can tell you that many regions are already experiencing this phenomenon in full force: California, Nevada, Arizona, Texas, Massachusetts, Virginia, Florida and even markets in Canada.
The five economic factors causing an inventory shortage
1. Slowdown of New Construction Starts
In the U.S., 1.6 million new construction homes must be built each year just to keep up with current demand (due to population growth, homes lost to natural disasters, tear downs, etc.). Over the last five years the U.S. has averaged approximately 600,000 housing starts per year. That’s a million homes short – each year! You don’t need to be a mathematician to realize this is a contributing factor to our current inventory shortage.
2. Re-entry of The &lduqoBoomerange Buyer”
A Boomerang Buyer is a homeowner who had trouble weathering the recession and as a result, lost their home to a foreclosure or short sale. These people are rebuilding their credit, however, and seven in 10 will return to homeownership within eight years of their foreclosure or short sale. Do the math; they are re-entering the market now! They represent over 20 percent of buyers in California, over 30 percent in Arizona, Nevada and Florida, and we’re starting to see a larger percentage of Boomerang Buyers here in the Midwest. So the re-entry of the Boomerang Buyer is causing an intense demand for homes, furthering the impact on inventory.
3. Arrival of The Echo-Boom Generation
The Echo Boomers are the offspring of the Baby Boom generation. There are 80 million of them and they are between the ages of 18 and 31. Why is that so important? Because the average age of a first-time buyer is 30 years old. What this means is there’s a massive conveyor belt of demand moving your way. And it’s just started up.
4. Increase in Life Expectancy
Good news for all of us: people are living longer! According to the U.S. Census Bureau, life expectancy in 1970 was 71 years old. The projected life expectancy in 2015 is 79 years old. As we grow older we’ll still need a place to live, which results in fewer available homes on the market.
5. Increase of Immigration And Population
It’ll come as no surprise, North America is still the promised land for many people. Population and immigration growth – both in the U.S. and Canada – are ticking upward with no end in sight. More people means more housing needs. It’s that simple!
So from a macro-economic perspective, these are the five forces affecting the market. The bottom line is, markets are experiencing a housing shortage, and if you don’t feel it yet, it’s coming.
As I mentioned, new markets create new challenges, but they also create new opportunities. This new market demands a new solution, and here it is: you must create your own inventory.
The days of sitting in the office, checking the MLS and waiting for other agents to bring you listings to show your buyer are over. You need to get out into the market. And you need to be strategic in your approach to acquiring more listings.
What are you going to do about it?
Are you feeling the pinch of the inventory shortage? If not, what are you doing to prepare for its inevitable arrival? Over the past couple of years, Brian would talk to me about sharing the strategies and resources I had used to generate listing opportunities in difficult markets. To be honest, I was reluctant at first because I knew it would require a tremendous amount of time and energy; two resources I had already maxed out.
However, after a number of conversations, Brian’s ability to persuade, and a lot of thought, I made a commitment: I would formalize a 10 strategy system to help real estate agents generate three additional listings each and every month. I did, and it’s here.
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