Articles & News
Supply Chain Problems at Lake Martin
Lack of inventory slows the pace of the lake market
Supply chain problems are not reserved to the ships lined up at the Port of Los Angeles or the lack of truck drivers to haul freight. Here at Lake Martin, we have our own supply chain problems that are putting a damper on the real estate economy. The shelves of available “for sale” inventory are nearly bare!
The demand for lakefront property, which hit a fever pitch during the COVID summer of 2020, has reduced the available waterfront inventory to record lows. The supply of available residential property dropped to a historic low on September 30, 2021. At that date, there was just a 1.74-month supply of available “for sale” property. Just two years ago, pre-COVID, there was 7.54-month supply of residential property.
Newly listed properties sold quickly over the last year. Even with the supply chain issues noted above, the dollar volume of sales for the past 12-month period ending September 30, 2021, was 9.5% higher than the previous year. Over the last 12 months, 423 residential properties were placed into the local Multiple Listing Service (MLS). During that period of time, 414 properties listed in the MLS were sold (a 98% sales rate). Two years ago, there were 508 properties placed in MLS, and 342 were sold (a 67% sales rate).
Low inventory dragging sales volume
While the numbers above look impressive, the sales pace has slowed. In August, the year-over-year volume increase was higher than September, with an increase of 22.5%. This pace is best measured by a month-verses-month comparison. This September, there were 33 closed sales compared to 56 in September 2020. The number of newly written contracts this September was 26 compared to 57 last September. Low supply has definitely affected sales.
This is a trend that began back in July when inventory levels did not rebound to historic norms. The chart below shows the normal peaks and valleys for the supply and the inventory-to-sales rate dating back to 2010. The pink line shows the normal peaks of inventory that occur in June or July of each year. The blue line shows the number of months of supply given the sales rate for that period.
As you can see, inventory hit low levels in the fall of 2020 without a rebound at any point during the last year. Properties were listed, then they sold quickly without ever creating a reliable source of supply for prospective buyers.
Property values increased
Basic economics teaches that as demand increases and supply decreases, prices will have upward pressure. We have noticed a textbook example of this basic economic law. The average sales price for a waterfront residential property* increased over the same period last year by 17.4%. When we compared the average price to this same period in 2019, the increase was 38%.
What we expect to happen
Our Realtors® have been beating the bushes looking for property owners that may be willing to sell. In a few cases, they are able to list a property for sale which results in a short marketing period and successful closing. In most cases, however, property owners are unwilling to sell their property, even for an attractive selling price. Their answer is typically one of the following two standard answers.
“We just love our lake place, and we don’t want to give it up.” Or we hear them say, “If we sold this lake home, we don’t know what we would buy to replace it. Nothing is for sale!”
This is a trend we have been observing for some time. For that reason, we work closely with builders and developers who have made final additions to existing neighborhoods like White Oak Landing, The Ridge and The Willows, while staying abreast of new communities, like The Heritage. We also have been working closely with people who currently own a lake place and have expressed a desire to sell to help them prepare their property for the market.
Properties continue to sell fairly quickly when they come on the market. If you want to be “in the know” about newly listed properties, we advise you to reach out to one of our Realtors® to stay abreast of the latest offerings. They will be happy to keep you informed on the latest and greatest in the lake market.
* Residential property includes single-family detached houses, townhomes, and condominium units.