April 24th, 2015
Although an available home for sale can be a sight for sore eyes in markets where inventory is tight, homebuyers need to be cautious of what Redfin calls a stale listing. These are homes that have been on the market for months but haven’t sold because they need some work, are overpriced or have another issue. Typically, these properties have been listed for 30 days or more.
“All the desirable properties are getting snatched up in three days,” said Connie Durnal, a Dallas Redfin agent. “The ones that are left become our stale inventory.”
She went on to say prices are climbing as a result of these homes because bidding wars are breaking out more often for the houses people want. Consequently, the stale homes also see a price increase, making them more undesirable considering their condition and high cost.
Prospective buyers contribute to stale inventory
The issue with stubborn homes is not purely an issue of subpar properties. In some cases, the buyers are contributing to the problem.
“In Denver and Silicon Valley, if the house has been on the market for two weeks, there is something wrong with it,” Redfin Chief Economist Nela Richardson told CNBC. “Everyone is afraid to overpay, and the herd behavior in the stock market is something we’re now seeing in the housing market.”
Consumers have more access to data about homes while shopping around, so they’re able to make more informed decisions before they schedule a walkthrough. However, this information coupled with lingering fears following the housing crash have made some buyers too cautious, causing them to stray at the slightest hint that a property is overvalued.
The trend may not last long
Despite the stubborn nature of stale inventory, Redfin said many buyers are biting the bullet to grab an available home whenever they can. In some markets, this may further tighten inventory, but the good news is overall inventory is up.
The National Association of Realtors reported a 5.3 percent month-over-month boost for existing-home inventory in March and a 2 percent gain compared to March 2014. Michael Alderfer, a Redfin agent in the District of Columbia, said many consumers will be fighting for these homes that are newer to the market to avoid the stale inventory. However, many will expand their search over time once they see the amount of competition for desirable properties.