Traditionally, May is one of the best months for real estate agents.
Winter’s chill is gone, replaced by sweet spring air. Flowers are in bloom, grass is green again, and a new crop of buyers emerge to start the hunt for new houses.
However, the last few years house hunting has gotten harder and taken longer for many buyers.
Housing inventory in metro Toledo has been shrinking the last three years, and prospects for a reversal, short of a local economic disaster, are not good.
The numbers are clear-cut: In May, 2015, a total of 3,186 single-family homes were listed for sale in Lucas and northern Wood County. A year later, the May listings were at 2,958, and last May they fell to 2,566 listings.
That represents a 20 percent drop year-over-year in the last three years.
“It makes for an interesting time,” Doug Kwiatkowski, the new president of the Toledo Regional Association of Realtors and a real estate agent with Re/Max Preferred Associates of Toledo, said. “We really have to hustle. We’re scouring every day trying to find new product for clients.”
It isn’t that there aren’t sellers.
Every month new homes do come on the market. But like inventory, the new listings have been dwindling month-over-month.
In May, 2015 there were 922 new listings, which decreased 11 percent in May, 2016, then decreased 8.5 percent in May, 2017. In May, 2015 homes spent an average of 106 days on the market before selling, and that is now at 94 days as of May, 2017.
While it is getting harder for buyers to find something they like, for sellers these are halcyon days.
The median sales price in metro Toledo has gone from $116,200 in May, 2015 to $129,000 as of last May. The average price, which was $133,207 three years ago, hit $150,000 last May.
Also, real estate agents report many homes are receiving multiple offers and deal sweeteners, like all-cash bids and offers that exceed the listing price.
“The impact of it all is that you have increased competition. When you have more people looking at a house that tends to create a frenzy,” Mr. Kwiatkowski said.
“When a good house comes on the market, it could have 10 to 15 showings in the first couple of days because buyers know that you just can’t wait. There’s a frenzy upfront to see the house quicker and that leads to a steady increase in market pricing,” he said.
The reasons for the growing inventory shortage are varied.
“We talk about it almost every month when the numbers come out, but it’s hard to pinpoint,” said Mark Remeis, an agent with A.A. Green Realty in Bowling Green and the past president of the Realtors association.
“I don’t know if there’s still some lingering effects from the recession, but there are a number of people out there now, people who got burned before, may have lost their homes, who are saying, ‘I’m not going to buy a house again,’ or if they have their homes still and are maybe underwater, saying, ‘I’m not going to move,’” he said.
Mr. Remeis said the general feeling among local agents is that people who potentially could become home sellers instead are choosing to stay in their homes longer.
The National Association of Realtors agrees.
Prior to 2007’s recession, respondents to an NAR survey on homeownership said the expected to stay in their homes no more than nine years. In 2017, a majority said they planned to stay 15 years or more.
“It’s the lingering effects of the recession,” Mr. Remeis said. “Many who haven’t finished paying off their homes are asking themselves, ‘why take on more debt? I’ll just stay in my house.’”
Another factor causing inventory to dwindle is a lack of new product that existing homeowners can move up into. New home construction on a speculative basis, while much improved the last 10 years, is still not up to pre-recession levels in the Toledo area and may never be anytime soon.
Without new product to entice sellers to put their homes up for sale — even in a market with rising prices, low interest rates, and multiple offers to choose from — many would-be sellers don’t want to risk a sale.
“That new construction, at least in northwest Ohio, has not come back to where it was pre-recession. Every week we run into a situation where I’ve gone somewhere to see a seller and they say, ‘if I sell, I don’t know where I’d go. There’s nothing for me to look at,’” Mr. Remeis said.
Mr. Kwiatkowski agreed. He said he has spoken to at least six potential sellers who have chosen to sit out instead of selling. “They’re all afraid to be homeless. They can’t find a house they’d like to move to and they don’t know where they’d go if they sold their house,” he added.
Area home builder Jim Moline, of Moline Builders in Sylvania Township, said most sellers moving up to a new home nowadays seem to prefer a custom job rather than a spec home.
“When it gets to the higher end a lot of people would rather build what they want,” he said.
But Mr. Moline added that, if it seems as if there’s a dearth of spec homes, it is because financially no builder wants to risk making a living off specs homes. Many spec home builders went out of business in the recession, and those who survived still recall watching their friends go out of business.
“Once you get burned, it’s pretty hard not to remember that. And the guys who survived remember what happened,” Mr. Moline said.
“Because of what happened in 2007 and 2008 I think there’s a little bit of hangover from that. Most guys will say, ‘I don’t want to put up 10 specs and then have the market fall down,” Mr. Moline said. “...Back in the day, a guy would put up eight or 10 specs. But today, put up eight or 10 and the market changes on you and you’re done.
“That’s why you don’t see subdivisions with 50 lots anymore. If the market changes, you’ve still got to pay the taxes on that. So guys are putting up 12-lot subdivisions because it’s safer,” Mr. Moline said. “And if there’s only three spec homes in an area, [buyers] are less likely to find what they want.”
Mr. Kwiatkowski said local agents are frustrated because they believe they could sell more homes if more inventory was available.
But situations that might increase the inventory either are unlikely or undesirable.
“Interest rates, if there’s a slow increase, in the short term we would see inventory increase. But that would also slow [sales] down,” Mr. Kwiatkowski said. “And a large economic challenge, like a 9-11 situation or an auto plant shutdown, that would be a huge negative economic input and cause inventory to rise. But that would cause a lot of harm,” he said.
Toledo is not alone in terms of shrinking inventory.
“What you’re seeing in Toledo is very, very similar to what we’re seeing in most of the country, especially out west,” said Adam DeSanctis, a spokesman for the National Association of Realtors.
According to NAR figures, inventory in the U.S. has been dropping, like in Toledo, each month for three years. Nationally, homes that took 50 days to sell last year now sell in just 42 days.
“Unless you’re moving to a rural area where there’s not a lot of jobs or you buy a cabin in the woods, that’s the only place where price and demand have softened,” he said. “But pretty much any market where jobs are growing and you have an industry or two, you’re looking at low inventory and rising prices.”
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