Vail Daily real estate column: Realities of low-inventory real estate market
You’ve thought about selling your home. A similar home in your neighborhood recently sold for more than you thought it would. You hire a real estate agent to list your home. This is the typical scenario for homeowners. As a result, throughout time, price growth should stimulate inventory growth. That’s not how things have been going lately.
The number of homes for sale has declined for two years straight and, in the first quarter of 2017, hit the lowest level since the housing market recovery began in 2012. In February, there were 161.1 existing homes for sale per 1,000 households, according to the National Association of Realtors.
At the same time, home prices have been rising more or less since 2012, in many markets matching or surpassing pre-recession highs. In Vail, the trends have been similar, as inventory is at low levels for the most desirable properties. Those homes with mountain-facing views are in thin supply. If the property does not have a good view or is dated, then it either sits on the market or will require a price adjustment to stimulate activity.
It turns out price recovery is a double-edged sword. According to an analysis out last March from real estate data and search site Trulia, markets where home values have gained the most since the recession actually have the tightest supply right now — this holds true for Vail, as well.
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“A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years,” writes Trulia Chief Economist Ralph McLaughlin. “On average, the more valuable a market’s housing is compared to pre-recession levels, the larger drop in inventory it is has seen.”
In some cases, what’s happening is that potential sellers don’t want to sell in a hot market because they are afraid they won’t be able to find another house to live in once they sell. In Vail, we have the added challenge of finding desirable inventory based, in large part, on the style of home that the buyers want to move into.
Looking for Special Features
Qualified buyers are ready to buy, but the options are scarce for the type of home they are seeking. More and more buyers are only interested in new mountain-modern turnkey homes. Those homes come to the market and sell very quickly for top dollar. New-construction homes offering modern finishes and big windows with views of the surrounding mountains are selling prior to completion at very close to asking price.
Today’s buyers are looking for special features such as open floor plans, radiant in-floor heat, home automation systems, clean modern fixed finishes, large mudrooms and generous storage spaces for all of their bikes, snowmobiles, etc. In many cases, the homes are smaller, on average, than they were 10 years ago.
As the trend continues toward more modern and minimalist architecture, sellers should consider assembling a team of advisors to provide direction on preparing your home to sell. Having an architect look at how to make minor changes can provide a big impact on desirability. Updates to kitchens and baths can still garner big increases in sale ability, but getting it right is critical.
A good real estate agent can provide insight into what the current buyers are asking for or objecting to. That perspective is worth its weight in gold. Knowing the things to do or not to do will net the best results and the most money in the least amount of time.
In the case of older, dated homes, pricing it correctly is the single most important factor. Understanding the right comparables for the property means knowing each neighborhood, similar finishes and condition of the home compared to those sold with details such as highway impact, views, floor-plan layout, mechanical and roof condition, which weigh heavily on the value and, ultimately, the time it takes to sell the home.
The outlook for the Vail market remains a mixed bag, with new turnkey homes moving quickly for top dollar and older homes lagging both in price and time on market. As we experience more pressure on inventory, we can expect to see more demand for old homes to be razed in favor of brand new construction, which should drive land prices higher for the more desirable redevelopment opportunities.
Tye Stockton is global real estate advisor for The Stockton Group and LIV Sotheby’s International Realty.