An imbalanced housing market? Local real estate experts weigh in on Louisville’s low inventory problem
Greater Louisville Association of Realtors President Judie Parks said a family she has worked with on finding a new home has been in temporary housing for nearly two years.
They sold their home quicker than anticipated and have been unable to find the home that fits their unique wants and needs, competing in a market with an army of interested buyers and significantly low inventory. The number of active listings in Jefferson County is down nearly 50% from the same time last year, according to recent GLAR data.
While the example above is rare and extreme, Parks said it illustrates some of the challenges and frustrations buyers and sellers are running into in this market — with no immediate relief in sight.
“We are experiencing an unprecedented market with extremely low inventory combined with very low interest rates. It’s a great market for sellers, but I don’t think things will change for buyers for another 18 to 24 months,” Parks said in a recent GLAR news release.
Parks said you sometimes have to write seven to 10 offers to get one offer accepted.
“Some are choosing to rent because they’re frustrated,” she said of buyers.
The mix of low inventory and low interest rates have led to imbalances within the market, and it will take more than one or two adjustments to increase inventory. Interest rates are between 3% and 3.5% right now, Parks said.
An increase in interest rates may decrease the buyer pool, though Parks doesn’t foresee any spikes there in the immediate future.
But new construction, Parks added, is needed as a means to give buyers more housing options. Hundreds of new homes have been proposed in different parts of the county in recent months, but the construction industry has been dealing with price increases on lumber and construction materials that have posed their own challenges when it comes to new home deliveries.
Both Parks and Joe Hayden, principal broker and owner of RE/MAX Properties East in Louisville, said the market remains strong for sellers, but the lack of inventory requires more preparation, strategy and creativity on the part of buyers.
“It’s the market energy where the number of buyers is so much larger than available homes,” Hayden said. “How quickly can you get to a home, how quickly can you make an offer and how [creative can you be]?”
Hayden said those who understand the process — have their financing, lender and home inspector lined up early, and can write a tight contract quickly and confidently — are the ones seeing the best results right now.
“This low inventory problem started a few years ago and it’s hit almost its logical end,” he said. “We’re at the bottom or close to it and that means change is likely coming.”
What that change will look like isn’t yet known, and Hayden said you may see the pursuit of more creative property transfers, negotiations or creative loan products to make some deals work. But no one thing will break the dam and create a rush of new listings.
He said the end of the Covid-19 pandemic may also lead to some decrease in hesitancy for people to list their home. Some have chosen to stay put and refinance their homes, taking advantage of the low interest rates. Others may have waited to list because they have family members with health conditions and didn’t want to risk exposure to Covid-19 from strangers.
And some are hesitant simply because they’re afraid to be displaced if they run into trouble finding a home.
“They look out in the market and don’t see anything they want to buy. If they don’t have cash or equity, they can’t win against a cash buyer,” Hayden said.
Despite these inventory challenges, the residential sales volume was hot throughout 2020, and the trend has continued in 2021. GLAR reported sales volume was up 6.2% in March, and more than 1,000 homes were sold during the month in Jefferson County.
Parks remains optimistic amid the challenges, saying there are still opportunities for buyers and fertile ground for sellers to make their move.
“This is the kind of market that really brings home the value of a Realtor,” Parks said, noting the need to juggle so many aspects of the home-buying process in a fast-paced market.
Without someone to help you, she said, “you’re going to get lost.”