Low inventory drives real estate market

 

Part 1 of 2 series

 

HONOLULU ADVERTISER , July 31 2005

BY LISA SCONTRAS

Custom Publishing Group

 

Fast-selling homes, record-high prices and a looming rise in interest rates have created a gold-rush-style buying frenzy in the Hawaii real estate market. But the buzz among analysts now is the extremely low inventory. And it's the inventory, they say, that is affecting prices even more dramatically than the low cost of financing.

“Low mortgage rates definitely stimulate sales activity, but will not necessarily exert upward pressure on prices if there is sufficient available inventory,” says Mike Sklarz, senior vice president and head of analytics at Fidelity National Financial.   The depleted inventory of available listings on the market — evident by multiple offers and bidding wars — reflects the fact that there are far more people wanting to buy and not enough people wanting to sell. According to Honolulu Board of Realtors research analyst Harvey Shapiro, “Inventory levels are almost at the lowest point ever. It never even came close to these levels during the Japanese bubble.”

Months of remaining inventory is a market indicator that combines supply and demand into a single statistic. It projects how long the active listings (supply) will last at the current sales rate (demand). In Oahu’s current housing market of strong sales and very low inventory, the months of inventory remaining is at an all-time low.

 

Sklarz agrees, saying that inventory levels haven’t been this low since the 1970s.

“The available inventory of single-family homes and condominiums for sale is at very low levels from a historical perspective. This creates a much greater sense of urgency on the part of buyers who know that their choices are limited,” explains Sklarz, who has been examining and evaluating real estate sales data since 1979.

 

“In addition, many of the listings have been selling very quickly --- median sold market times are also at historically low levels — so there is a legitimate fear with buyers that the property will be sold if they don’t act on it right away.”

 

When asked what factors might affect inventory and make more properties available, his response was a simple one: “Inventory can be influenced two ways — first is via the construction of new homes and condos; second is if more people decide to put their homes or condos on the market.”

 

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