There Are Only So Many Houses For Sale, There Cannot Be A Crash!

Why is everyone ignoring the elephant in the room?

This elephant dominates our "homelessness" issue, and our "housing affordability" issue, and prevents any housing crash.

The elephant is: There are only so many homes to sell.

What does that mean?

New homes built today are about the same number in 2008, despite an increasing population. In fact, it is the decreasing population that may cause our housing stock to finally catch up.

So one reason that housing prices cannot CRASH is that there are only so many for sale. In fact, think about last year when we had 11 offers per home. If demand dropped in half, that still leaves 5 buyers per home. How much farther would it have to go to actually have more sellers than buyers?

This also plays into the "homelessness" issue, as higher housing prices cause more economic disaster, with high prices for housing many people find it viable to live on the streets of Los Angeles where it is tolerated.

This also accounts for the "housing affordability" issue, where the low inventory keeps prices high, creating a smaller portion of the population able to buy homes.

Yet, despite the obvious effect of the reduced housing stock on homelessness and affordability, there is no support for increased home building in California, and even other Western States are using a fabricated water shortage to reduce new home building in Utah and Arizona. 

That said, as long as there are not enough homes, absent a US depression, or massive recession, prices can only go down so much before buyers are available to purchase them.
without cars and to eat bugs. 

So, where are we?

Mortgage rates were a wild ride last week, after declining to 6.2 the prior week they dropped below 6% on Thursday, only to close back at 6.19% on Friday. Still, it looks like mortgage rates are NOT skyrocketing, but have increased and reached a new level.

Additionally, inventory remains at historic lows, only higher than last year's COVID peak low, but otherwise below every other year on record. Here are the national numbers:

Here is another graph from Redfin that shows that even the highest level of inventory in the last 3 years is below all-time numbers

Here are Los Angeles numbers, showing also that current inventory levels are below all non-COVID periods on record.

Another key metric to follow is the price per square foot, which shows over time how much a square foot of house is worth in each of 4 market segments. And, again, that number has been fairly stable and has increased steadily over time.

So, what does the real estate news industry do? Well, still its a mess.

For example, Realtor.com's Sr. Economist's headline is "..Home Prices Continued to Slow in November 2022" Remember when they were projecting housing crashes? Now, completely discredited, they are reporting data from 3 months ago?

But my raspberry for the week goes to an article in Realtrends with Zillow's Chief Economist Skylar Olsen. When Zillow launched, it was all about data and revolutionized the real estate industry by bringing data analysis to a seat of the pants industry. Their book "Zillow Talk: Rewriting the Rules of Real Estate" brought data analytics to the industry, documenting the value, or lack of value, of staging, how real estate agents underpriced homes, and other major insights. Yet, here is their chief economist, and her contribution is to share on Realtrends "how to talk to home buyers and sellers about the market."

Now, Skylar may be an economic genius, and her resume would seem to show appropriate experience for that.

Yet, from all evidence, she has never sold a house to a buyer or represented a seller. So, rather than stay in her lane and report on the data, like all industry pundits, they need to find something interesting to get our attention so they make stuff up.
--
Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents national probate experts.

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