Why Is Inventory So Low?
Home inventory is one of the most talked about Real Estate topics in the United States, especially in Southern California where we’ve had a shortage of inventory over the last 5 years.
In today’s post we’re going to start a three-part series on why home inventory is so low just so home buyers here will have a greater understanding of the cause of the problem and how it affects them.
New Home Development
Following the housing crisis of 2008, we just haven’t had enough new home development in SoCal but the big question is why?
Cost of land – In speaking with developers across Southern California they’ve consistently told us SoCal land literally costs a “premium” to develop and for many companies it doesn’t make sense financially for them to start new developments.
Type of homes – A big portion of home buyers over the last five years have been Millennials or first-time home buyers.
Sadly, many of the homes which have been built in Southern California in recent years have been built for “move up” buyers or individuals who already own their own homes and are moving up to their next homes.
Move up buyers in Southern California typically have a higher net worth than first time home buyers. They are more prepared to buy homes in the $500,000 to $1,000,000 range and often have the cash to buy those homes compared to new home buyers who might need financing.
It’s understandable that builders in Southern California would want to build homes for a move up buyers because those higher priced homes help them to cover their costs.
Sadly, a lack of starter homes and more affordable properties in the So Cal Real Estate market is making it more difficult for most buyers to find properties.
Southern California Is Growing
Besides the issues that we’ve discussed in this article, another big reason why we have a home inventory shortage in SoCal is the state continues growing.
More people are moving here from other states or other countries. When you combine this with higher birth rates in the Golden State it’s easy to see how and why it’s getting harder than ever for buyers to find homes here.
The good news is that at Fred Sed Group we work with a network of builders in Southern California and can help you find the new home you’ve been searching for that falls within your price range.
If you’re searching for a fixer-upper or pre-owned property, we can also help you to find those homes as well.