Buyer Frustration with Low Inventory
Survey: Inventory Shortage Frustrates Buyers
The survey shows a shortage of inventory and rising prices—both of which naturally benefit sellers—are creating frustration for buyers trying to get in on the ground floor of the housing recovery. According to Redfin’s findings, 79 percent of buyers who responded to the survey now believe home prices will increase in their neighborhood over the next year, up from 71 percent in Q4 2012. The share of buyers who believe prices will rise “a lot” more than doubled, increasing to 22 percent from 10 percent previously.
Forty percent of buyers said the trend of rising prices is a concern for them, up from 33 percent last quarter.
At the same time, 66 percent of buyers listed low inventory as a major concern in 2013’s first quarter, up from 59 percent in the fourth quarter. When asked what has surprised them most about their local real estate market, 38 percent of respondents mentioned a lack of inventory.
Given the situation, it seems buyers are now understanding how much of an advantage sellers currently have. Only 40 percent of buyers believe now is a good time to buy in their neighborhood, down quarter-over-quarter from 48 percent. Meanwhile, 48 percent say it is a good time to sell, up from 27 percent before.
These concerns are driving buyers to change their purchase plans, said Redfin blogger Tim Ellis.
“In response to the one-two punch of rising prices and tight inventory, more buyers are expanding their home search to new areas they haven’t considered before,” Ellis wrote on the company’s blog. “More buyers are increasing their budgets, as well. Thirty-four percent of respondents said they were ‘ready to pay more,’ up from 26 percent last quarter.”
Low interest rates were still the driving force behind most buyers’ current market presence; 58 percent selected that choice as the reason they want to buy now. Rising prices are also a factor, with 40 percent saying that is one of the reasons they’re currently in the market to purchase (up from 33 percent in last year’s fourth quarter).
While prospective buyers are clearly frustrated by the current market, most are still willing to keep trying. According to Redfin, the percentage of buyers who are “taking a break” dropped to 32 percent in the first quarter, down 6 percentage points from the last.
“Buyers are feeling the pinch and few are backing down. With expectations set for even more price increases in the coming year, anyone thinking of getting into the market as a buyer in the coming months should expect to encounter an intense market, where sellers have a clear upper hand,” Ellis wrote.”