It’s probably no surprise to anyone reading this blog, but the real estate market is red hot.
Things are so busy in my world, that finding a few minutes to write this blog is difficult. Normally, I tend to take my time writing my blog posts, I fret over what to say, I write a draft, I edit and or re-write the draft a few times before completing a final product. NOT THIS TIME! Short and sweet, then it’s back to work, bad grammar and incomplete thoughts be damned.
My expertise is land and farms – that sector of the market normally moves a little slower than the residential sector. When a parcel of land becomes available for sale, even in a strong market, it may take a few months for ‘the right buyer’ to appear. In a slow market, it is not unusual for a land listing to be on the market for a year or longer. A decade ago, many lot listings were on the market for 3 to 5 years before they eventually sold, and often significant price drops were required to induce the sale. In the current market, many new listings of land are selling within a week. Case in point: I recently listed a small farm – the Seller and I agreed on a price that would ‘push the limits’ of the market. Within two days, the Seller had four offers with the highest offer exceeding the list price. Of course, my friends that specialize in residential real estate have been dealing with a super-hot market (bidding wars, multiple offers, frustrated buyer’s, long days, high stress) for about a year now and they won’t have any sympathy for my plight in the land market.
I’ve had several clients ask if this market is a “bubble” (similar to 2003 to 2007) that will burst? In my humble opinion, there are two major differences between then and now. First, the bubble 15 years ago was driven by weak loan underwriting standards: just about anybody could get a loan (“no income, no problem”) and this created artificially high demand and extreme risk for the lenders. In the current market, buyers are having to use a large chunk of their own money, which tempers demand. When the next downturn happens (it’s always a matter of ‘when’ and not ‘if), foreclosures will be much less prevalent, and the downturn should be much more manageable.
Secondly, when the price of land escalated rapidly in the early 2000’s the result was an increase in supply. A substantial number of new lots were created through subdivision. When the foreclosure crisis began in 2007, a large number of new listings were coming onto the market – demand fell right when supply was rising. The result was a significant over-supply of land, and prices dropped precipitously. Currently, there are very few new subdivisions working their way through the approval pipeline. When (not if) demand slows, inventory will remain ‘tight’, and any price correction should be much more tempered than was experienced in the 2008 – 2011 great recession.
If you have any questions about land, farms or subdivision, please give me a call. Be safe!