At first I thought our record high inventory was due to people wanting to cash out and leave SD, and secondly due to payment shock from adjusting loans.
However, I remember a comment made by realtor Bob C., saying inventory is rising only because sales are down. So the homes are piling up on each other.
That is exactly what I think is going on in my neighborhood. The 2 homes on my block currently for sale are not due to ARM resets. One is an estate sale (the guy died), the other is a middle-aged couple wanting to downsize for retirement, and a 3rd one will go for sale very soon because the owner is relocating for a promotion. Then there is #4, currently pending.
The problem is, demand is so low, these homes are just piling up on each other. Last year, all these homes would have sold within a few days or a week, and there wouldn’t even be one For Sale sign in my neighbohood. Instead, there will be 3 signs by next week (plus the 4th that finally went into escrow but still has the sign up).
I am sure there are also people selling due to resetting loans. My chiropractor who lives in 4S Ranch said TWO of her neighbors had to sell for that reason, and she told me, “They had to sell fast, so they had a fire sale.”
If demand keeps declining, and next year we have rising inventory due to payment shock, how high will our inventory get? 30,000? 35,000? Could it get higher than 40,000? Dare I suggest 60,000?
Will demand stay at 30,000 homes sold/year, or can it go down to 20,000? Could it get as low as 2,000 sales in the year 2010?
What kind of pricing pressure do you get with inventory of 40,000 homes and sales of 2,000; that’s a 20 month supply. I better stop writing, because I am scaring myself. Impossible? Possible? Are we at risk of having a 20 month supply of homes as inventory keeps rising and sales keep falling?
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