Back in November 1997 I purchased a 3 bedroom condo in Santa Barbara, California for around $265,000. Less than 6 years later I sold it for $749,000. Now I’ve learned that in many areas around the country it’s 1997 all over again. The National Association of Realtors says that sales of previously owned homes dropped 4.8 percent to 4.91 million units in 2010. That means that the number of people who bought previously owned homes last year fell to the lowest level in 13 years. If you’ve been keeping up with the number of previously owned homes sold in your state, you are aware that 2010 was slightly lower than 2008, which had been the weakest level since 1997.
According to an Associated Press article that was sent to me on January 20th, 2011, “The poor year for sales ended strong in December. Buyers snapped up homes at a seasonally adjusted annual rate of 5.28 million units, an increase of 12.8 percent from November and the strongest sales pace since last May. Still, many economists believe it will take years for sales to rise to a normal level of around 6 million units a year. And some say 2011 will be even weaker than last year because more foreclosures are expected and home prices are likely to keep falling through the first six months of the year.” This doesn’t fully factor in “foreclosure limbo”, which has left an enormous number of unsold houses on the market. As a result home prices have plunged in virtually every state and county across America .
According to the report I read today, the inventory of unsold homes as of December stood at an 8.1 months supply. That’s down from 9.5 months supply in November, but there are hundreds of thousands of houses and condo that will soon be added to this supply as they are foreclosed upon. These months of supply represent the amount of time it would take to sell the remaining inventory of homes on the market at the December sales pace. A normal inventory supply is six months. The only good news this author sees in today’s report was that, “For December, sales were up in all parts of the country with the strongest gain a 16.7 percent increase in the West. Sales rose 13 percent in the Northeast, 10.1 percent in the South and 11 percent in the Midwest.”
The report also claimed that median price for a home sold in December was $168,800, which was down 1 percent from a year ago. Again, this doesn’t begin to reflect the number of homes about to go into foreclosure. As millions of adjustable rate mortgages are in the process of being reset, the number of people who will be losing their homes will soon skyrocket. The need for rental housing will quickly reach critical mass as displaced former homeowners go looking for a place to live. For property managers, it’s fast becoming a time when there will be more applicants and prospective residents than there will be vacancies. Yet all this also would seem to mean that the caliber of residents (people who are more accustomed to being homeowners) will be increasing.
The prospective residents who’ll soon be calling you are the kind of people who are used to taking pride in their homes as well as taking care of them. They’ll have had personal experience in maintaining and beautifying the places they call home. This is a national tragedy unfolding before our very eyes. For caring, diligent property managers it will be the opportunity of a lifetime. You’ll be making a positive difference in the lives of many people who need safe, affordable housing. Tell your owners that we’ll soon be approaching a time when they can increase their number of rental units at prices we haven’t seen in over 13 years.
Owners and their property managers will be part of the national solution to this housing crisis, and the rewards will be remarkable.