Scarce Inventory Boosts Real Estate

Everywhere you go in Florida, everyone is talking about real estate. It’s really engaging, even when you are just trying to enjoy your vacation.

Yesterday we made a few stops on the Parade of Homes near red-hot Sarasota. Even the so-called custom builders are too busy to customize anything right now. They are just building spec homes and then auctioning them off to buyers in real estate “shootouts”.

Houses that sold for $400K last year are now $600K. Houses that were $600K are now $850K. Some neighborhoods have doubled in price. If you bought a year or two ago, you feel like a genius. If you haven’t bought yet, you aren’t sure what to do.

A huge driver of the price acceleration is that the people that already live here aren’t too interested in moving. Active home listings in Florida are down over -70% compared with a few years ago. I haven’t seen this phenomena covered much in the media, but the trend is shocking when you see it in this chart …

You would hope that we could build our way into more inventory and builders are trying. It’s just not fast enough. As the chart below shows, housing starts for single family homes in Florida are rising from year to year, despite the recent difficulties getting construction materials …

We have some friends who are building near Sarasota and their construction is stalled as until more materials arrive. One agent told us that homes that used to take 6-8 months to build are now being quoted as 16-18 months. People expect that both timelines and prices will get worse before they get better.

How tight are housing inventories where you live? Would you consider moving now given how dynamic the real estate market is?

Image Credit: (c)

9 thoughts on “Scarce Inventory Boosts Real Estate

  1. We live in a mid-Atlantic state, and our area is no different than most. It has been on fire for some time now. Construction costs are significantly higher at this point though. Our son-in-law is a builder and they have been absolutely slammed (extremely busy) for the last five years building custom homes. I asked him this weekend if they saw any slowing in our market. He said for the first time in ten years, they have fewer houses under contract than normal. They are booked through Spring of 2023, but he’s normally booked 2-3 years out. So I think there could be a pause coming in our local housing market, possibly driven by high material costs, general inflation, and an overall general unease in the economy. (Is it smelling like a recession for those of us old enough to remember the last 2-3 recessions?) Fortunately, he is preparing to pivot to building rental units for investors. He has three close older real estate investors (yes, I’m one of them) ready to build lots of rental units. We’ve been building reserves to be ready for when he was ready to pivot his business model, so we should be able to keep them busy for at least a year or two building rentals, if thing do slow down in the custom home market. Win-win…

    Liked by 2 people

    1. As they say, “you can’t build a tower to the sky”. The tremendous increase in home prices has to effect demand at some point. Pivoting to rental properties would seem to make sense. Home values and rents have to be inextricably linked. Thanks for the insights, Thom!


  2. There is very little inventory in my area of the People’s Republic of California to the point that we receive a constant barrage of mailings from realtors trying to find owners they can convince into selling.

    Liked by 1 person

    1. Yes – we’ve been getting phone calls from realtors at our rental houses in Florida. Much better to be a seller than buyer right now. A new listing is easy work for them to cash in on … if they are lucky enough to find one!

      Liked by 1 person

      1. One would think that this would drive down the price of realtor’s commissions, similar to what happened to the stock brokerage industry. US fees are much higher than the UK.

        I have noticed that the some realtors are offering to front money to fix up and showcase homes as their value proposition. Get that older home that is liking owned by a long term owner up to current standards. Looks like they are trying to nudge that person will sell when their house is ready.


  3. We had a call 3 days ago with the CEO of LWHomes, our builder. Trusses have been delayed by 8 weeks. We are not alone.

    He told us they have been thinking way outside the box and even considered buying a truss company to control being first in line. Wow! That is impressive.

    Yesterday, the trusses were delivered and construction can resume. For us. The truss company told them they may have to concentrate on spec homes as they can turn them out much faster than for custom homes.

    So, where will LWHomes get their trusses for homes already under construction? Good question. They are searching across the country and competing with every other builder. My hope is that some homes don’t end up with problems due to builders having to settle. Remember the drywall from China? Let’s hope there is not a similar situation in the near future.

    Good read and thanks for the nod.

    Regards, Regina ________________________________

    Liked by 1 person

    1. Spec homes seems to be the direction builders are heading to keep up with the demand. Just build’em and auction them off. Having built two completely custom homes, I’d have a hard time spending big money on a luxury home and not get to tailor it to my lifestyle. Good that you guys got in before the rush and can get what you want!


  4. I have observed that over the course of making a relationship with real estate proprietors, you’ll be able to get them to understand that, in every real estate financial transaction, a payment is paid. In the end, FSBO sellers will not “save” the commission rate. Rather, they fight to earn the commission by simply doing a good agent’s work. In accomplishing this, they devote their money and also time to execute, as best they might, the responsibilities of an broker. Those tasks include revealing the home by way of marketing, introducing the home to prospective buyers, building a sense of buyer emergency in order to make prompt an offer, organizing home inspections, dealing with qualification check ups with the loan company, supervising repairs, and facilitating the closing.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s