What Does an Agent Mean When There is Low Inventory?
What Does an Agent Mean When There is Low Inventory?
If you're on the hunt for a house, you probably heard about how the housing inventory is in dire straits. It's not just the Vancouver real estate market; across Canada, the real estate inventory is in a crisis situation.
We're still far from stories of buyers selling kidneys as listing real estate agents field dozens of offers over the asking price. But, it's the real estate market, you never know.
There are quite a few reasons for the situation of the housing market right now. Home prices have been on the rise for a while fewer and fewer houses go on sale. With record-high home prices and near-historic lows when it comes to new real estate listings, it's not just home buyers scratching their heads but real estate professionals as well.
Low inventory means is more demand for homes than there are houses.
In a seller's market, one where the most active buyers beat out other buyers, it's normal to see new listings vanish quickly. However, when it comes to low inventory situations, the market simply does not have more sellers willing to part with their homes, even at Vancouver real estate prices for a small suburban home.
Active listings don't stay that way for long with offers pouring in even before an open house. A well-connected agent can still find potential deals early on but even they will have issues when the housing supply runs truly dry.
Is this a good thing for sellers?
It might seem like it at first glance but unless the sellers have another home to move into, they will probably be reluctant to sell.
Even the luxury market has been hit by skyrocketing prices. Regardless of the market they're looking in, even active buyers spend months trying to find the right home.
Determined buyers will be willing to put down a lot more than the list price and waive conditions on their offers in order to get better chances but like mentioned above, you need to be ready to do the same thing for when you're on the buying end as well.
Low inventory creates an extreme seller's market.
Anyone in the market for a house wants to deal in a buyer's market or a neutral market. Either of those types of markets means that the homes sold have been sold at a reasonable price.
A low housing inventory, however, creates a situation where you will get "less house" for the most money possible - if you can even find a house.
It's not so much that there aren't many houses for sale but that many markets find themselves in a situation where even a good agent will have a hard time finding upcoming listings that won't be swarmed with offers even before it lands on a multiple listing service.
How to find the best property deals when inventory is low.
Just because it's very hard to find a property when the inventory is low, that doesn't mean that sales don't happen.
The good news is that if you're in the market for an apartment then you're more likely to find something if the housing inventory is mostly lacking in properties that demand a mortgage. Rental listings, in Toronto for example, boomed at the beginning of the pandemic. Of course, this was before the market adapted to the new reality of people trying to move away from dense population centres.
Although you'll need to cooperate with an agent closely, you might even find a condominium that fits your needs while the attention of other buyers is fixated on homes.
If you're set on buying a home, even when the housing market is facing an inventory crisis then your best bet is to get a real estate agent early and get your documents in order.
The truth is that, even in times where the housing inventory is low, there is a delay between sellers contacting an agent and the home going on the market. During that lag time, real estate agents working for buyers can secure what's called a pocket listing.
A pocket listing is a property that is not actively being marketed and is instead only made available to a select few buyers. There is no way to guarantee that you're the best person for the property, especially in a volatile market but having a good rapport with your agent can't hurt.
What can be done to help buyers?
Now that the pandemic is receding, the total inventory of houses should increase as construction projects resume and pick up the pace.
The truth though is that many Canadians have been priced out of purchasing homes are a reasonable level and that will force the market to correct itself. There are a few theories about why more buyers showed up at the beginning of the pandemic and one of them is that real estate makes for a great investment even in the face of a financial crisis.
With the hype building about a type of asset, it generates huge amounts of demand. However, it's unsustainable in the long term when housing starts to dry up.
It's something of a bubble and crash scenario where the bubble is about to pop. Your local real estate agent can guide you through what the burst of the bubble means for you but it's going to hit home sales across the country.
It will be up to each local real estate board to mitigate the effects of the bubble burst but real estate tends to be a very resilient asset type.
Low-interest rates, meaning a lower mortgage on average, contribute to creating a buyer's market but that's far from the only factor that can make things better.
What are the signs of the bubble bursting?
The first few signs of the low inventory crisis coming to an end will be when you find stories where homes failed to sell far above the asking price.
Make no mistake though, homes will still be expensive and will sell above asking - but the typically larger margins seen in a low-inventory environment will be emaciated and brittle.
Homes will start selling at a record pace, especially for smaller homes and more affordable homes.
Pocket listings will still exist, as brokerage firms will still try to bump up the price on properties that are worth it but these will not be one of the main surefire ways for buyers to secure a house.
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