Condos and Assessments can be quite the drag

Recently I noticed a large scale drop in listing activity and cancelations in a local condo tower. I decided to 'sniff' around and discovered that the building was originally plumbed with the dreaded Qest Polybutylene plumbing and a large scale assessment was likely for all the homeowners in order to get the building replumbed. This is a pretty large building and it looks like each homeowner is facing a sizable assessment from the HOA. Whenever I show a property my client seems interested in builtin the 1990s window, I check under the counters for that gray color pipe and fittings. If so my standard beware disclaimer is forthcoming. 

The piping has a tendency to abruptly fail in rather catastrophic fashion usually leading to a burst pipe or fitting and lots of water going everywhere. It is a problem that can be remedied but at a cost. Selling units that are facing this situation is not as hard as people might think, and there are strategies depending on the sellers financial disposition to make the process seamless. But for buyers looking at properties be it condos or houses, checking for polybutylene pipes is important, because it is not a matter of if, it is a matter of when the flooding will happen.

There could be opportunity for a "deal" if there really is such a thing right now, in this building because a certain percentage of buyers will simply run away from these because of the perceived problem associated with the assessment and the timeframe for remedy.

Sometimes a bad thing can be a good thing.  

Market Remains Tight but Not Hot, There is a difference.

Our market seems like it is hotter than Monday's all time record afternoon high temp, but digging into the numbers reveals our seller's market is only tenuous at best. Multiple listing service stats show Clark County over the last three months has only had about 150-200 transactions per month which is well under the 400-600 we are accustomed to seeing in the springtime. The culprit isn't a lack of demand but rather a lack of inventory. It looks like the pandemic left a chink in the armor of the real estate market. It seems few people want to sell their home. 

I get it, Clark County is a great place to live and this area routinely finds its way onto best place to live type articles in various national magazines. But sellers seem to be worried about their ability to buy another house when they get their current home in contract. That is a fair consideration but it is exasperating our dilemma with inventory. Sellers are in control of the market, they can easily dictate terms of sale to buyers including longer escrow periods and rent back after close clauses to allow them time to acquire a replacement home.

Personally I had by best year ever in closed volume in 2020 and one of my best in total units closed and this year I have been off to a rather sluggish start. Largely due to a lack of listings. Many of my clients that are in that 'sweet spot' 5-8 years since they bought their last home are not interested in selling. Everyone seems to be content, whether truly so or worried about an uncertain economic future, they are choosing to stay put.

The listings I am getting this year are almost exclusively people that are leaving the area to either retire or for an employment change. The "move up" market seems almost dead. Prior to the COVID 19 pandemic new home builders were making a killing by providing inventory to a very hungry market, but alas, they have run into high cost of materials and a flat out lack of materials to keep pace.

The bottom line is that this sizzling hot market is at least a bit of a mirage as it is completely supply side driven. The number of buyers is shrinking due to affordability, but the number of homes for sale is also shrinking and or flat. Prior to COVID we had a robust almost neutral market slightly favoring sellers and now we have a much smaller market with tight inventory and a bidding war on nearly every home that comes to market in the price ranges from $300k-$900k. 

Hopefully the materials shortage will ease up and allow home builders a chance to continue providing new home inventory. That could be the trigger mechanism for would be sellers as they would not have the concern of finding a replacement home when they sell their current home.

Listings Still Rare, But Inventory is Softening

Well, softening a little bit. Listing count is up and that is a good thing, but in most price ranges and market segments, buyers outnumber sellers in fair numbers. Buyers still need to bring their "A" game with offers lest they be outbid. Buyers need to understand that a house that is really nice and move in ready, modern design, etc will likely get bid up. Homes that are older or maybe a little bit of disrepair are less likely to be bid up.

As new construction ramps up with materials finally starting to retreat back on price and availability this will offer buyers options to resale homes that have been in tight supply of late. I see a soft landing in real estate over the next couple of years. As interest rates rise, which they likely will, due to aggressive spikes in inflation, real estate demand will see a slowing decline and begin to match the inventory. 

Some people fear the "bubble" and that is a real thing, but to burst the bubble we would need to see a major rise in listings and I don't see that happening.

Buyers should feel secure in the decision to purchase a home, and skeptical potential sellers should see more opportunity on the buying side over the next few months which may make them feel comfortable listing their home. 

Here's to a nice couple of years with modest increases in housing prices and a slow and low rate of interest rate rise.