Friday, February 4, 2022

Strange Market Conditions and Tight Inventory

Yes it seems that the inventory in Clark County is once again tightening. There was the usual squeeze at the holidays, but it seems January remains tight as well and not just seasonally. Sellers are still in command in this market but as rates stat to rise as they have been since the first of the year, buyers will be forced out of the market and seller's may not be in as strong a position as they think.

The rate uptick will get a lot of buyers off the proverbial fence, but it may also eliminate them completely from the local market. We have been walking that tight rope since the interest rates started moving south over the last six weeks.

2022 may end up seeing a return to neutral conditions. We had a slow down about two years ago that put us in near neutral conditions for about six months after several years of a strong seller advantage. Then supply chain issues and other economic factors put us right back into the seller's market. Inflation is the classic double edged sword. It puts upward pricing pressure on new homes and that can lead to upward pricing on resale homes. But the other edge can cut into the buyer pool as incomes can't keep up.

Clark County is nearing its capacity to produce incomes high enough to buy a typical house. This is what happens with rapid price appreciation. The oddity about our current situation is that employment remains tight and that is putting some pressure on employers to pay more money. Although incomes are not rising faster than inflation right now, they are rising to fill some 9 million vacant jobs nation-wide. If the economy stops producing jobs we have a bit of a cushion now, but eventually we could see job losses as employers give up and either automate or downsize. We are seeing that trend emerge now. This could have dire consequences on the broad economy and certainly the housing market.

Potential sellers should look at the now and decide whether or not to take the REAL risk of waiting. No one knows what the market will actually do, we only have past models and current trends to guide us, but these are unprecedented times with the lowest labor participation rates in 40 years. Analysts are struggling to wrap their heads around this bizarre scenario we find ourselves in. 

If you have grand plans and the current market allows you to capitalize on them, don't get greedy. Waiting might be better but it is possible and maybe even likely, it will be worse later, not better. This current market is tailor made for the old adage; "a bird in the hand is better than two in the bush."

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