A recent Wall Street Journal article raised several questions about supply and demand in the housing market, and it struck a resonate chord with what we are seeing in the world of Lamorinda real estate. The Journal article raised the question about whether “it’s low demand or poor supply that’s hurting the housing market.” Due to the fact that we tend to market a substantial number of homes in the Lafayette real estate market, we’ve received at least 5 calls from other agents in the last couple of weeks, asking if we have any new inventory that will be coming on the market. The agents all explain that their clients simply aren’t finding what they want among the current Lafayette real estate offerings. Almost all of the calls have have been in the $1.5M – $2M segment — an area of the market that has been one of the most negatively impacted over the last couple of years.
The Journal article discusses a number of factors contributing to the perception of poor quality or inadequate inventory, and notes that over-pricing is a significant factor. We have found this to be true, particularly over the last few years as the market has been declining. In at least 50 percent of all of our interactions with sellers, the challenge for us is to help the client understand the state of the market and where their home should be priced in order to compete effectively. It’s often as emotional as it is intellectually challenging, because it is sometimes very hard for sellers to grasp that the home they cherish so much has been impacted by the broader market conditions. They often want to believe that they’ve somehow been spared from the degradation in home values, or that “the right buyer” will come along who “will pay our price”, but ultimately they need to face the market realities. In the end, over-pricing hurts them as the market discounts their price over time, and consumers begin to wonder “what’s wrong with that house”.
As we look at the current Lamorinda real estate inventory, there is a fair amount of over-pricing in certain segments that is undoubtedly keeping buyers away, coupled with overall declines in inventory over the last year. Some sellers have simply taken their homes off the market and are deferring plans to downsize until they see stabilization in prices. That stabilization is already happening in certain price segments, and may spread to others if we see broader confidence in the economy as we move into the Spring market. Ultimately, that may solve our inventory problem.