Scarcity – Is a Real Seller’s Mindset
The one product and service that never goes out of style is scarcity. Once a product or service is considered to be scarce, it becomes a matter of time when those prices to obtain it rise to a level that fulfills the prophecy that it is scarce and hard to come by.
Up until this point, inventory was considered to be the driver for the scarcity mentality in this seller’s market, but it’s not about a shortage; it’s about a fear that there aren’t enough houses.
In October 2018, there was a 5.8-month supply of single-family homes for sale. That translated into nearly 40,000 single-family homes in the state of New Jersey. Back at that time, the days on market statistics translated into 67 days on market before a property sold. It didn’t improve much even over the course of 12 months where in October 2019 the average days on market was 65 days. But still it was enough to go around, or such was the perception.
If you could imagine, the median sales price in New Jersey was $305,000 back in October 2018, but then jumped in 2019 to $335,000. That was a 9.8% jump, which even back then was a lot.
Today the report shows that there were 19,500 single-family homes available for sale in the month of July. That’s a pretty significant drop from the nearly 40,000 single-family homes that were for sale back in October 2018.
But when buyers want to buy, scarcity becomes the biggest determining factor. In October 2018 there were 7,100 closed sales; in October of 2020, 8,900 closed sales. Most likely the biggest difference was the millennials coming into the market. For the last few years before 2019, the home-flipping market was very strong. That’s indicating a strong appetite for renovated homes, which usually were the kind of homes that first-time buyers were looking for. Now first time buyers have to step up what they’re willing to pay for a house. Thus with the shortage of first-time home buyer homes, the inventory shortage begins to take on a different meaning.
Home-buying cycles usually trend about once every 8-10 years; the last one was in 2006, and because of COVID-19, clearly this one was slightly delayed. But when it came about, it became twice as strong.
So if we compare the new listings for 2021 and 2018 we will find the number of new listings in 2018 to be 10,800, whereas in 2021 they were 11,200; that’s about a 12% increase.
What we are looking at is the effect of inflation upon a market. The low interest rates only added fuel to the inflation fires that were beginning to burn back in 2018. As long as mortgage rates continue the trend at 30-year fixed rate lows of under 3%, first-time buyers and other buyers are more than willing to risk putting down a 20% down payment in the housing market that appears to have more demand than homes available for sale.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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