Will Home Prices Continue to Rise?
The supplies of homes in Santa Clara County were largely dependent on distressed property sales in the form of Bank Owned and Short Sales since 2008.
The reduction of distressed properties available, which accounted for almost 50% of all sales in Santa Clara County from 2009-2011, is the reason the supply of homes available on the market has decreased. The demand from investors and 1st time home buyers searching for bargains meant potential buyers were chasing down any available Bank Owned and Short Sale listings. In the past, with favorable inventory, this was a favorable approach for people entering the market. With distressed properties no longer available in the high numbers in the recent past, the market demands have thinned and become extremely volatile and unpredictable. Buyers searching for distressed properties tend to exit the market once bargains are no longer attractive and contribute heavily to the potential for demand collapse.
The regular home owners are turning into“Zombie Homeowners”:those who are unable to enter the market for several potential reasons. Some do not have enough equity to pay realtor’s commission while others do not have the necessary 20% down payment needed to secure a new house. Others face the timeless challenge of not having a high credit score or an income strong enough to secure a new mortgage loan. Whatever reason describes their limitation, they are the new class of homeowners who are stuck in place and unable to buy or sell. The market simply lacks repeat buyers who, in the past, left their homes and updated or downgraded to new surrounding, leaving a unit of supply available to feed the market. Without this aspect, supply is simply removed from the market and not replaced.
The simple answer is that with decreased supply and increased demand, it is likely that prices will continue to rise but the pace this will occur depends on your local market since the distressed homes supply varies widely from one location to another. The most important thing to remember is that prices WILL increase, giving people entering the market a good understanding of how long they can expect to be in the market and how they will have to develop their price limits for submitting offers for homes.