6 Reasons for Home Inventory Decline Applicable to Los Angeles Real Estate Market

A recent blog post from the Wall Street Journal discusses six trends that explain the ever-decreasing number of homes for sale. Homebuyers experiencing frustration with the current Los Angeles real estate market should be aware that the following conditions are affecting housing inventory nationwide:

  • Fear of a negative impact to their credit discourages most underwater homeowners from short selling.
  • Some homeowners who would consider an upgrade to a more expensive home lack sufficient equity in their current residences to be able to afford it.
  • Homeowners who do have equity believe market values will continue to rise and are opting to wait so that they receive the highest return on their investment.
  • Traditional homebuyers are increasingly competing with a multitude of investors that purchase homes either at auction or with the intent to become landlords. Both scenarios achieve the same result—inventory is kept off the market.
  • Recent government regulations and settlements from the 2010 “robo-signing” scandal have resulted in a significantly slower foreclosure process. Banks have also increased approvals for loan modifications and short sales, thus lowering the amount of foreclosures that are eventually listed.
  • Still licking their wounds from record-low levels of housing starts in past years, new-home builders have been slow to react to the relatively recent demand for more housing inventory.

While those looking for Los Angeles homes for sale may not be comforted by these factors, understanding them may help shed some light on their home buying experience.
Posted by Ben Nicolas on
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