The New York Times recently suggested that limited inventory may not ease anytime soon because:
- higher rates will lock low-refi people into their homes.
- homeowners expect more appreciation in their homes.
- refi owners who move prefer to rent their homes rather than sell.
Does the NYT’s argument hold water in our market? Agent Chris Iverson pondered both sides of the equation. He expects that limited inventory will probably persist, but not entirely due to “the fallout from refinancing,” as the NYT suggests. In our local bubble, getting locked in by low rates doesn’t really apply, because so many deals are cash.
However, there is plenty to keep people in their homes. First, as Chris put it, “We have a 3.5% 30 year fixed loan on our house. My wife tells me we will die there, hopefully not soon, but sometimes I wonder.” Second, people are are betting on the run continuing. Third, price increases make moving up harder “for those without liquidity events, who work for a living,” Chris wryly observed. Instead of selling the three bedroom to buy a four bedroom, they just add a bathroom and bath. The reno numbers pencil: $150,000 for an addition versus $300,000 for a bigger house, and they keep the tax base. We see this trend in South Palo Alto, Mountain View and Los Altos.
Photo credit: Flickr / Len “Doc” Radin
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