Inventory & Sales Price Fluctuations in California and Beyond

Realogy expected to see bigger sales price and sale sides increases for Q1 2016. According to the company’s latest report, transaction volume was at its projected level, but other key metrics came in at the low end of projections.

Low Inventory

One factor contributing to Realogy’s difficulty in hitting its targets for sale sides and sales prices was low inventory, which is a problem currently plaguing real estate companies nationally as we approach the spring buying period.

An improving job market, low mortgage rates, and strong demographic trends inspired many experts to project a boost across the board to housing industry metrics, low inventory in particular home value ranges slowed activity enough to drag down the market as a whole. Realogy’s company report states that move-up and first-time buyers looking for low-to-mid range value properties were the demographic most impacted by inventory.

Greater Impact in California

Realogy noted in its report that the lack of available homes on the market was especially impactful in California throughout the first quarter of 2016. Two key markets in particular — Los Angeles and San Francisco — are experiencing severe inventory constraints that are holding prices flat.

The situation is making California move-up sellers reluctant to list their homes, and buyers are increasingly relying on mortgages instead of arranging cash purchases.

There is some light at the end of the tunnel heading into the busy season. Realogy notes that, even though improvement is slow, there have been three consecutive months of inventory increases. Projections call for another increase in the second quarter of 2016 as people start to build confidence that they can achieve their target sale price if they put it on the market.

For now, the numbers are still lagging far behind the norm. Realogy says California is at 4.5 to 4.6 months of available inventory. The normal range is six to seven months. Other markets already are on the rebound, and experts are encouraged that the Los Angeles and San Francisco can accomplish the same feat soon.

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