Where are the listings?

This article is reprinted from Wine Country Real Estate, a special advertising section of The Press Democrat.

So far the 2015 Sonoma County home selling and buying season has been a mixed bag. We have modest sales increases (+5% over last year at this time) but a median home price hitting a new post-recession high of $550,000-an increase of 11% over last year. The big increase in the median home price is driven by buyer demand, low interest rates and a lack of homes for sale. Every Realtor knows the biggest hindrance to a robust real estate market, the factor which drives every market, is an abundance of homes for sale. We all anticipated more inventory for 2015 but is has not materialized.

Currently we have only 828 detached single-family homes for sale in Sonoma County for a population of some 500,000. Of those 828, a third or 259 are over $1,000,000. New listings really begin making an appearance in March. This year March came in like a lion but went out like a lamb. New homes hit 624 in March but then dropped in April, May and June to 604, 603 and 582 respectively. The fuse got lit but fizzled out. March, usually the month signaling the beginning of a surge in new listings, turns out to be the best month for new listings. Why? Below are some reasons compiled by the California Association of Realtors and myself as to WHY new listings are not hitting the market in any sustainable quantity.

Investor renting their 'flip' ready properties instead of selling them. A smart flipper can achieve a fabulous return on their investment by using escalating rents to give them a great return. This is good for the existing rental inventory but doesn't help buyers looking for fresh, new homes.

The 'mortgage lock-in' effect. How many of you locked in those fabulous rates in the sub 4% range. How do we get you out of that rate into a new home and a higher rate? 4.25% is not that high but letting go of mid 3% is tough.

Where will I go? This is the current conundrum of our real estate market. 'Sure, I'd love to buy a move up or move down home but nothings out there' We hear this constantly. 'Find me a home and I'll list.' Then you have to sell their house to complete the sale of the new property. Not an easy chore. We've had to do some creative thinking to accomplish the always trick sale then buy scenario.

The Dried up Foreclosure pipeline, once the bastion of affordability, accounting for up to 55% of all sales, is now negligible. Foreclosures provided a great resource for affordable housing, flippers and investors. This big listing pipeline now runs dry.

New Construction—yes, we are not building new homes at a rate to satisfy demand. The time it takes to take a project from bare land to finished community can take years and the fees are prohibitive.

The "Off Market" or "pocket listings" is a big issue in some marketplaces. Listings never hit the 'general' marketplace but are sold either 'in-house' or in private 'marketing groups'. In our super tight inventory market, Realtors/Agents are always asking to see new listings not yet on the market. We hear of sales being made off MLS all the time. Sellers and their Realtor/Agents state, "The Seller got their price." When in reality they will never know how much that "price" could have been if properly vetted to the open market!

Capital Gains/Property Taxes—we are dealing with Buyers now who are considering selling their home in the super-hot San Francisco/Peninsula area and moving north to the less expensive 'wine-country' (Median home price in SF $1,100,000 vs. 'Wine County' $550,000) but are getting hammered by capital gains AND property taxes. One client stated, after their $500,000 capital gains forgiveness, costs of sale and original basis, they would have to write a check to the IRS/State for $400,000. Plus, their new property tax bill would be $15,000 per year. They are staying put.

And what about all those retiring baby-boomers or 'empty-nesters'? They want to sell the family home citing big maintenance and too much square footage for two are suddenly BACK to being a 'family'. Kids are coming back; Be it the returning college student unemployed, or perhaps the kid with a young family still looking for employment or forced out of their rental due to skyrocketing rents? Either way we lose three possible sales: Mom and Dad help the kids buy a home (#1), Mom and Dad sell their big, family home (#2) and then they move down to a single level, in town, new home (#3). However, due to the capital gains and property tax issues, many 'empty nesters' are staying put, perhaps building a granny-unit 'rental' for additional income or even opening up their home to an 'Air B&B' or 'VRBO' scenario. Many are making their homes 'aging-in-place' friendly and just staying put.

Lastly, the big decline in home prices in our area due to the 'great recession' linger still. Our median home price increased 58% in the past three years but we still have many homeowners in trouble and underwater. And the foreclosure market, though virtually gone from the local MLS in measureable sales/listings, still lingers with many homes in 'pre-foreclosure' with late loan payments or in loan default. The number of homeowners selling due to a defaulted loan is troubling. At least now many have equity.