The talk around the city is all about the low inventory and how hard it is to find deals for investors. But why is the inventory low?
1. New home construction has not recovered
The chart below shows all the new homes coming onto the MLS. From a high of 813 in April 2005 they bottomed out at 100 in February 2011. In 2015 the most homes in one month to come on the market was in April with 312.
The change is even more evident when you narrow it down by county. In 2003 there were 2,555 new homes in Johnson county. Looking at 2015 this number has dropped to 1,030. The average price shot up to $460,455 in 2015 from $295,930 in 2003.
Johnson county wasn’t alone in a large drop
- 2003 – 1,462 new homes • average price – $213,882
- 2015 – 553 new homes • average price – $302,628
- 2003 – 577 new homes • average price – $174,882
- 2015 – 124 new homes • average price – $343,742
- 2003 – 1,270 new homes • average price – $215,552
- 2015 – 540 new homes • average price – $323,525
In these four counties that is a drop from 2003 to 2015 of 3,617 new construction homes on the market. Currently in these four counties there are 4,708 active single family homes of which 1,069 are new home construction.
2. Foreclosure listings are at 2007 levels
The number of foreclosures that are making it to the MLS have dropped from a high of 481 in April 2012 to 122 in April of 2016. In 2005 there were 5,296 REO listings compared to 2,527 in 20015. Many of the foreclosures can be purchased on websites like auction.com or hubzu.com before they ever get listed on the MLS.
On top of the drop in inventory the average list price to sell price is 99.44% in 2016. In 2009 REO listings sold at 92.35% of list price. With banks/government agencies likely to get close to their list price they are less likely to take an offer that makes sense to an investor.
Because of the low inventory the owner/occupant is looking at foreclosures with the option of using a renovation loan/203k loan. They are able to roll all their renovations into a loan with as low as 3.5% down payment of the after repairs purchase price.
If you have questions about any of these numbers or would like to know more about the market in your area email me at [email protected]
All market data is courtesy of Heartland MLS.