There is a shortage of home inventory Salt Lake County….. Today, looking at the inventory of homes and condos for sale there are 4267 units. Also today, there are 2248 home and condo units Under Contract. A rule of thumb to measure the health of the market is supply and demand. Supply and Demand is snapshot of the current market and how long would take to absorb the current inventory. A healthy market will have an absorption of 5 to 6 months of inventory. This supply and demand ratios keeps prices in check. If there is not enough inventory for the number of buyers, prices will increase. If there is a glut of inventory and not many buyers, prices will decrease. See chart below.
Based on the figures I gave you about the snapshot of todays market, we have approximately 2 months of inventory! This is at the extremely low range of the spectrum, which has and will cause extreme upward pressures on home prices. The chart below come from the National Association of Realtors for May of 2013. This reflects a national trend.
So what does this mean for a buyer or a seller, and what is expected in the coming months? Today, the sellers have the upper hand in the negotiations process. There will be little, if any room for a buyer to negotiate in price. There will most likely be multiple offers on the same home. The only thing that is keeping home prices from heading back to pre-bubble prices is the role of Appraisers and banks. They allow certain appreciation levels on sold comparable properties, so we are seeing small steps in appreciation based on what banks will allow. The second reason, that will play a larger role, is the negative equity home owner. The current negative equity loan count from Fannie May for April of 2013 is approximately 10,400,000 units. These are homes that are essentially locked up from the market pool because buyers are waiting for the market to improve before they even think of selling. So as prices appreciate, more and more of these homeowners will start putting there homes on the market. This should ease the upward pressure as time goes by.
Currently, in Salt Lake County, the negative equity is approximately 25% according to Zillow. See the interactive map below for other counties along the Wasatch front. When will this negative equity number be absorbed? Experts don't have a timeframe, and only say that the inventory in dwindling monthly. So stay tune for more updates as we see changes in our local market…. I will report it here.