CoreLogic, Inc., John Burns Real Estate Consulting, LLC and the California Association of Realtors recently presented a report entitled, Demand Drives the Market. In the slides below, I particularly like how they cleared up false truths surrounding inventory often heard in today’s real estate market.

Have fun with this True/False Quiz and see how you do! 

Inventory Shortage Clarity 

TRUE. There is a supply problem caused by the surge in DEMAND for both rentals and owned homes since both rents and home prices are both rising quickly. Household formations have surged. 

FALSE. Supply is low because many people are not selling their homes due to Covid fear. Sales are expected to be up 9% this year – the highest level in years. Sales cannot be up if fewer people are selling. Some people may be waiting to sell due to Covid. 

TRUE. Very few homes are available for sale, primarily because homes that come on the market are sold immediately due to high DEMAND. There is a supply shortage of homes available to purchase. 

FALSE. This is a supply problem due to years of underbuilding. If that were true, prices and rents would have been rising much faster than incomes in 2019. Prices, rents and incomes were rising 3-4% in 2019. 

TRUE. More homes now need to be built due to the surge in DEMAND that is allowing more people to buy or rent further from work.

Urban / Suburban Clarity

 TRUE. There has been an urban exodus as evidenced by a clear decline in rents in urban areas versus suburban areas in the last year. 

TRUE. There has been a surge in demand in outlying areas and more affordable metro areas due to a surge in newly-granted permission to work from home. Price appreciation in outlying areas and more affordable metro areas has been higher than urban areas and more expensive metro areas. 

FALSE. Urban is dead. Rents and home prices are now rising after a price/rent adjustment.

JBREC Housing Cycle Risk Clarity

 TRUE. We have an affordability problem for a rising number of people who are unwilling or unable to relocate. 

FALSE. Home prices cannot fall because supply is low. Demand needs to stay strong. Affordability needs to be maintained. If either erodes, the number of homes available for sale could quickly skyrocket. 

FALSE. We have an affordability problem for people who can relocate to an affordable area where they will also be happy.

Here’s the summary John Burns shared: 

• Housing demand has surged during the pandemic.
• The surge in demand – not a lack of home sellers due to fear of disease nor a years long dearth of construction – has caused a shortage of homes available to rent and own, particularly in more affordable area
• The surge in demand has caused home prices, monthly payments and rents to surge, which is an affordability problem for those who cannot relocate or choose not to relocate
• The continued health of the housing market depends on demand continuing to outstrip supply, and consumer’s ability to afford housing where they choose to live. 

We are watching the market closely and are here to advise you every step of the way!

Dana Green