Lack of Housing Inventory in Southern California Real Estate Markets

Housing prices rise and fall throughout the seasons and from year to year. Much of it has to do with supply and demand, which in turn are related to interest rates and other economic factors. There has been a lack of housing inventory in Southern California real estate markets and many other areas across the country. What does this mean for regular homebuyers and real estate investors?

Supply and Demand

Right now, supply is low and demand is high. Demand has actually been high for some time now, for several reasons. First, the economy has improved, enabling many renters to consider buying a home. Secondly, interest rates have remained relatively low during these past few years, encouraging many homebuyers to enter the market. It has been speculated that rates will increase throughout the current year, pushing many buyers to find a home before the it get too high. The lack of housing inventory in Southern California real estate markets compared to growing demand has created a growing gap between supply and demand.

What the Lack of Housing Inventory in Southern California Means for Homebuyers

For home buyers, the process of finding a home can be frustrating. Properly priced homes in good condition will go under agreement more quickly. In some cases, there may be multiple competing offers. With fewer options to consider and possible bidding wars, it can take much longer to find a home in this market. Thus, when shopping for a home, it is important for Southern California home buyers to make decisions and act quickly. Delaying a decision can result in lost opportunities. Furthermore, with prices on the rise, the longer it takes to find a home, the more buyers will end up paying. Therefore, acting quickly and making strong offers is normally the best approach in competitive markets.

Homes that have not sold quickly are likely in need of moderate to major renovation. For most homebuyers, the idea of taking on a big renovation project is a bit scary. Without experience, it can be difficult to estimate costs. Plus, it requires out-of-pocket expenses; most first time home buyers lack the disposable income necessary to take that on. These types of properties are usually better suited for investors looking to fix and flip.

 

Investors Buying and Selling in Southern California

A hot real estate market is actually ideal for real estate investors since it provides greater opportunity for returns. The lack of housing inventory in Southern California as a whole does not necessarily mean there is a lack of inventory for investors. Investors target homes in need of major repairs,… a much different property than what typical home buyers are looking to purchase. The ability to find these properties depends on an investor’s networking and marketing channels. It is not solely based on homes that may already be listed for sale. Investors who have well established sourcing techniques can still find homes to flip.

Once renovated and ready for market, Southern California real estate investors can then sell these properties for maximum market value. Investors actually benefit from the lack of inventory. However, with any fix and flip project, it is important to make good decisions and plan them well from start to finish. This requires extensive experience and proper resources. If you are new to the business, joining our investment partnerships may be a good way to start.

What to Expect from The Southern California Real Estate Market

Real estate remains one of the best investments that you can make, both for personal use or strictly for investment. Certainly, no one can tell the future. However, based on how things are going, the Southern California real estate market is likely to remain strong. Whether you are a private buyer or investor, it’s a great time to get educated on the markets and your options so that you can make smart real estate decisions.