Inventory Remains Low as the Real Estate Market Heats Up
The past several years has provided ample opportunity for home buyers here on Delmarva. Although we see home values beginning to creep up in some segments of the market, prices remain relatively low and extremely attractive when compared with the surrounding metropolitan areas. Interest rates are still historically low, giving purchasers more buying power than they ever had before, and the prevalence of government grants and programs available to help homebuyers is astounding. If it’s such a great time to buy a home, why aren’t we seeing a housing frenzy similar to that of the late 2000’s? The answer comes down to our inventory – we don’t have enough saleable homes on the market to support the buyer demand out there today.
In many price ranges, there are buyers just waiting for a home to hit the market that they might be interested in seeing. Approximately 64% of our sales in the past year have been under the $200,000 mark, with the average just above $160,000, making this one of the strongest price ranges with the most buyer competition. Inventory in this price range is down 37.6% from a year ago, compared with a 30.3% decrease across all price ranges. This is causing multiple offers to come in on well-priced properties, and buyers’ agents must get more creative to make their offer stand out.
You may be wondering why so many listings sit on the market and don’t sell, when there are so many buyers competing for homes. We all know of at least one house that has been listed for what seems like years – why aren’t these hungry buyers snatching up all the homes on the market? One reason is that the types of properties that are available for sale don’t always match the type of financing buyers are obtaining. We are seeing a sizeable portion of home-buyers using government-subsidized mortgage programs like FHA, VA, and Rural Housing, and with these programs, the home must be in good condition. Issues like peeling paint, wood rot, and missing flooring must be remedied to qualify, and if the home is not serviced by city water and sewer, the septic system and water must be acceptable as well. Even Conventional mortgages, which are much more lenient as far as property condition goes, still require the home to be in livable condition, free of health and safety defects.
Another factor for the inventory shortage is the amount that some of our current homeowners owe on their mortgages. For people who bought or refinanced since the real estate boom in 2008, they may be “underwater”, meaning they owe more on the mortgage than their home is worth today, and they are not able to sell their home without contributing a substantial amount of cash. In order for these homes to be sold under normal circumstances, we will need to see home values increase enough to cover the mortgage amounts owed.
If buyers are able to locate a home that they love, they have more options today than they ever had in the past. As the economy and real estate market in our area improve, we’ve seen an influx of new construction for the first time in over a decade. This is a positive sign because the re-energizing of the residential new construction market puts many tradesmen back to work at higher wages, while creating the new inventory we so desperately need. New construction does come with its own set of challenges, as many buyers (and subsequently appraisers) are unable to reconcile paying such a high premium for a brand new home vs. a resale. Other novel products like Renovation Loans and local rehab grants can allow a buyer to get creative with their financing and bring a home that is in poor condition up-to-date, while still qualifying for a mortgage. In 2018, we saw mortgage rates begin to creep up a bit. The
government shutdown at the end of the year caused rates to take another dip, but we expect them to slowly climb throughout the year. Although our job is easier when interest rates are low, rising rates do indicate a positive sign for the economy overall. And we hope to continue the positive trend in the real estate market into 2019 with increased sales, and hopefully new inventory to support the buyer demand.
ERA Martin Associates, the largest locally-owned real estate firm in the area, was proud to be recognized as the top residential real estate firm in Wicomico County in 2018. “2019 is off to a great start. Our Realtors are busy, and buyers are out there looking for their next home. It can be a challenge to help a buyer find a home that fits their needs with inventory so low, but educating our agents and consumers on the market and their options has proven helpful.” said company President Joni Martin Williamson. ERA Realtors forecast strong sales numbers through the balance of the year, and we hope to see home values continue to finally rise.
Article by Bill Martin , who founded ERA Martin Associates in 1985. ERA Martin Associates is the largest locally-owned real estate firm in Wicomico County, licensed in MD, DE, and VA. ERA has been the top real estate firm in Wicomico and Somerset Counties for the past six years, but the company is equally proud of their Customer Satisfaction Rating, which is currently a 4.91 out of 5, making ERA #1 in Sales and #1 in Service.