It wasn’t the weather, home prices, lack of buyers or Interest rates that slowed Louisville home sales in February 2017. Plain and simple it was a lack of inventory that caused sales to drop by 6% last month compared to February 2016. Buyers are having trouble finding homes especially in the $100,000 to $349,000 price ranges (see our absorption rate chart below).
Actually, the drop in home sales could have been a lot worse considering there were 20.6% fewer homes on the market last month compared to a year before. That 20.6% drop equates to approximately 1000 homes and when the inventory only totals 3652 homes, a drop of approximately 1000 homes represents a large chunk of potential homes to buyers. Remember, buyers are desperately trying to find a home before interest rates go up again.
There are several reason homes in the $100,000 to $349,000 price range are in short supply:
- Boomerang buyers (people who had their home foreclosed on or had to short sale their home between 2007 and 2014 are back in the market looking for homes.
- Home builders effected by the recession closed their doors or slowed production to survive. Those home builders are regaining confidence in the economy but many of their suppliers and trades (electricians, plumbers and carpenters) either retired during the recession or found other jobs.
- First time home buyers including millennials are now in the market trying to find a home.
- Baby boomers are ready to downsize but can’t find a home.
- Would-be sellers are concerned they won’t be able to find their next home because of perceived lack of inventory so they won’t put their home on the market.
So, the demand is out there but the inventory is hard to find. But as we mentioned not in all price ranges. In fact, in the $350,000 price range and higher homes become more available. We measure the heat of the buying market with the term “absorption rate”. If we turned off the faucet right now and did not allow any more homes to come onto the market, the absorption rate measures the number of homes on the market, buyer activity and homes going under contract. The scale is fairly simple, a six-month supply of homes or more is considered a buyers’ market. A 5 to 6 month supply is equal to a neutral market and anything less than a five-month supply of homes is said to be a sellers’ market.
Review the colorful graph below and you’ll see that homes in the $100-$349,000 price range are in a firm sellers’ market in fact you might consider it an amazingly hot sellers’ market. Also look at homes in the $700,000 price range and above, well into a buyers’ market. If you have a home in that price range you’re going to need some amazing marketing to get buyers into it. You’re up against a lot of competition and the number of buyers looking in that price range right now are minimal.
If you have questions about buying or selling, we can help! Call 502-376-5483 or send an email to Bob@wesellLouisville.com.