The low inventory market makes the current environment a great time to sell, according to Coldwell Banker CEO Ryan Gorman. It does, however, provide some challenges for prospective homebuyers, but Gorman, in a virtual town hall event, gave consumers advice on how to navigate buying in a low inventory market.
“If you’re contemplating moving, or are one of many people who are contemplating accelerating your life plan a bit, now is a moment to get your property into inventory,” Gorman said. “Get it prepared, get it priced and get it on the market.”
Gorman explained that he’s pushing consumers considering a move to list their home now. While it’s difficult to know what the future holds, he said, there’s definitely a shortage of inventory today.
There’s often inventory waiting in the wings, he explained, which is a key area where an agent can help.
“When you’re consulting with a busy Coldwell Banker agent in a busy office, that agent is speaking with not only homeowners in their former customer group and their future customer group, but all of the other agents in their office,” Gorman said.
Sellers should also connect with agents early to start that match-making process, which is all the more crucial in a low-inventory environment.
“Connect with your agent,” Gorman said. “Be really clear about your wants and needs.”
“Start shopping virtually, get into some properties so you can narrow down neighborhood and property type,” Gorman added. “With that kind of clarity, your agent can take it back to the office, communicate with other agents and perhaps drive some inventory onto the market that may have been on the sidelines.”
While Gorman doesn’t have a crystal ball, he does believe the inventory challenges baked into the market aren’t going away in the near-term.
Homebuilders have been reluctant to build entry-level homes, particularly in the detached, single-family range. Homebuilders, according to Gorman, are a cautious bunch and the COVID-19 and economic uncertainty hasn’t helped.
“We’re building half of what we need as a country, maybe less,” Gorman said. “I do not see that changing in the very near term.”
Homebuilders are reporting more interest, so many are doubling down, despite the uncertainty, according to Gorman. Still, overall, with a pretty good sense of what’s coming due to forward-looking indicators like permit activity and housing starts, Gorman said he doesn’t believe there’s going to a big influx in new construction, especially for detached single-family homes.
Most of the economic uncertainty is due to COVID-19 and the associated high unemployment rates, but for consumers fearing that another major, lengthy recession is on the horizon — akin to the 2008 great recession — Gorman tried to allay those fears.
“Back then, it was really a real estate lead recession,” Gorman said. “Unfortunately there were loose lending standards and maybe overbuying of properties, some mortgage banking chaos with mortgage-backed securities.”
“We don’t have any of that now,” Gorman added. “In fact, homeowners were building equity in their homes, credit was growing and we were in very good shape.”
The 2008 recession led to a massive spike in foreclosure rates. While Gorman believes there may be a small increase in foreclosures, he doesn’t believe that foreclosures will become a significant segment of the market like in 2008.
While acknowledging the high unemployment rate and furloughs hitting the workforce right now, Gorman also said the industry needs to remind itself that in 2006 to 2008, there were a lot of people in homes that didn’t have a lot of equity or had subprime loans, which forced them to move out while underwater on the property.
“A decade of tight lending standards mean that Americans have more equity in their home today than ever before,” Gorman said. “I don’t foresee a massive increase in foreclosure activity in the near term.”