Low Inventory, No Problem | The Residential Specialist

Low inventory levels continue to limit progress in housing across the country.

By Brittany Magee

For one of the first times since 2007, it’s a good time to be a seller, as a housing shortage has hit U.S. markets nationwide, driving up the value of listed properties. But the lack of supply and affordability has left buyers in a state of frustration.

Prior to the crucial spring season, existing-home sales experienced some flux as an uncharacteristically large drop was succeeded by an unexpected rebound the following month. In February, sales plummeted 7.1 percent to a three-month-low 5.08 million annual rate after a 5.47 million pace in January, according to the National Association of REALTORS^® (NAR). All four major regions experienced declines, with the Northeast and Midwest hit the hardest. Sales bounced back in March, however, with a 5.1 percent jump across all regions, which was a 1.5 percent increase from the same time period the year before.

“Buyer demand remains sturdy in most areas this spring, and the mid-priced market is doing quite well,” says Lawrence Yun, the chief economist for NAR. “However, sales are softer at both the very low and very high ends of the market because of supply limitations and affordability pressures.”

First-time buyers have felt the lack of selection more than others. In March, first-time buyers accounted for only one-third of sales, unchanged both from February and a year ago, according to NAR. “Unfortunately, the same underlying deterrents impacting their ability to buy haven’t subsided so far in 2016,” Yun says. “Affordability and the low availability of starter homes is still a major barrier for them in most markets.”

In the San Francisco Bay area, limited inventory is a serious problem, says Carl Medford, CRS, of the Medford Real Estate Team in the East Bay area. “It is propelling home prices upward as a result, and homes in the area are typically only on the market a week and receive multiple offers.”

Homebuying will continue to slow as demand exceeds supply across the U.S. New buyers are flooding the market due to low mortgage rates, low unemployment and increasing rental prices. Plus, more would-be buyers are returning to the house search after being unsuccessful in 2015.

Managing Frustrations

With fierce competition in markets nationwide, buyers will be facing an uphill battle in the hunt for a home—and their REALTORS^® will, too. REALTORS^® will experience challenges as they help potential buyers navigate the inventory drought by offering advice, managing expectations as well as finding leads about what’s coming on the market.

Matthew Meister, CRS, an associate broker of Coldwell Banker Town & Country Realty of Kearney in Kearney, Nebraska, and former president of the Nebraska REALTORS^® Association, acknowledges that working in a market with limited inventory can be frustrating. However, he says it’s important as a CRS to not just analyze the entire market, but to be more specific because each price range has its own nuances.

“The key issue to understand is that every market is different, and agents have to be able to analyze their own market,” he says. “Even though the total number of listings is low, some price ranges are overly saturated with options.”

Being able to properly analyze your market will help you manage clients’ expectations of what they can afford and how quickly they need to put in an offer. “We have an extensive dialogue with all potential buyers before putting them in our vehicles,” Medford says. Before hitting the market, Medford prepares clients for the tight market by:

Providing checklists of things they must have in place before they see any property
Teaching them how to facilitate the viewing process to maximize the number of properties they see
Prepping them for writing fast offers
Going through all of the nuances of writing without contingencies, having enough funds in the event of low appraisals, etc.

He also teaches them the “8 Critical Things To Forget” (see sidebar below) when trying to buy a home in a low-inventory market. “I teach these to agents at local marketing meetings and other venues,” Medford says. ”It’s a reality check of how to train buyers to effectively compete.”

As an independent broker and listing agent, Margaret Rome, CRS, owner of HomeRome Realty in Baltimore, Maryland, deals with inventory the same way in any market. “We have many different neighborhoods, but there will always be the same few areas that are always hot—with low inventory—that people want to get in to,” she says. “And you always have to manage client expectations about price.”

When the market is tight, Rome advertises for specific homes qualified buyers are looking for. She advertises on her website, in print media and on her blog, and discusses the needs of buyers on her weekly live radio show, ‘All About Real Estate.’ “This is similar to a dating site,” she says. “It’s matchmaking for lovers of homes.”

Two Key Components

While there are a variety of ways for REALTORS^® to deal with a low-inventory market, two of the best things you can do are what REALTORS^® are accustomed to doing on a regular basis:

1. Communicate with other agents.

Other agents are your best sources for knowing what’s coming on the market so you can quickly connect your client with the right house. “Networking is important when we’re dealing with listing shortages in any price range,” Meister says.

2. Put in extra work for your clients.

When houses are scarce and prices are high, clients are going to rely on their REALTORS^® more than usual. “Go out there and be proactive for your buyers,” Rome says. “Tell people what kind of house you’re looking for and show your buyers that you’re working for them.”

And remember—sometimes the most frustrating times in real estate are the best times for the best REALTORS^®. “I think that’s when clients start to say, ‘I don’t need a REALTOR^® who sits and waits for my phone call, I need a REALTOR^® who’s going to be out there advocating for me all the time,’” Meister says.