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Inventory Crises

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Michigander

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It seems that in many parts of the country, there is a severe shortage of inventory in the starter and mid move-up markets. We have talked about institutional investors buying up distressed properties, and lenders retaining the shadow inventory, but have we talked about our own aging population and strategies for the future as part of the problem?

I am seeing a lot of houses and condominiums being purchased by people as an investment strategy for cash-flow in retirement. They are largely buying starter houses in good shape, and with either retirement funds or equity from their home. A way of hedging bets about social security or dissolving pensions. Is this strategy putting a strain on the inventory available in your markets?

Would love a dialogue about this as it certainly seems to be happening where I live, and I understand the rationale behind it. If builders are starting in the higher price ranges, it won't relieve the shortage and rents will continue to rise, causing more people to look at this as an alternative.

My $0.02 for what its worth
 

gregb

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Curious about the reasons stated as an investment strategy for cash-flow in retirement. Not sure if that is linked to a concern for "A way of hedging bets about social security or dissolving pensions."
 

Michigander

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Greg, if you can get a positive cash flow, and have a tenant pay the mortgage, wouldn't that be yet another way of diversifying the portfolio? If the goal was $3,000 a month in retirement, and SS was going to pay $1,000 per month, and IRA $1,000 per month, and the owner could buy now and be closer to that come retirement (gap between mortgage and all expenses, and rent), then wouldn't it make sense? This is what I meant, and also, many people are not sure about there being any social security left when they retire, or pensions for that matter.
 

Michigan CG

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Not seeing any of that here. What I am seeing here is older, close to retirement people paying top dollar for ranch houses that are new construction.

No investor dollars here as the rent will only support the mortgage payment which is a negative cash flow in the end.

Social Security is a problem and it will have to be changed as unfortunately both parties have stolen the money over the years but it is safe for anyone over 45.
 

A K

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Maryland
I think we have a severe inventory shortage because many people are still waiting to get back to even on their real estate. Low inventory makes prices go up and when prices go up there are sellers.
 

Michigander

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Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
Not seeing any of that here. What I am seeing here is older, close to retirement people paying top dollar for ranch houses that are new construction.

No investor dollars here as the rent will only support the mortgage payment which is a negative cash flow in the end.

Social Security is a problem and it will have to be changed as unfortunately both parties have stolen the money over the years but it is safe for anyone over 45.

Monroe is different than Ann Arbor for sure. But yes, those newer ranches are hard to come by, and usually far away from the amenities you want when you are old (such as hospitals and grocery stores that are not 20 miles away).
 

Michigander

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Professional Status
Certified Residential Appraiser
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Michigan
I think we have a severe inventory shortage because many people are still waiting to get back to even on their real estate. Low inventory makes prices go up and when prices go up there are sellers.

It is pretty market specific about whether the prices are nearing pre-crash or not. My market has mostly far exceeded it and there is a lot of money being paid, but no inventory (which is really hurting). No one will take house sale contingencies in my market, so people won't sell because they are afraid if they do, they will be priced out of a house they want and will have sold their house with no place to go.
 

Michigan CG

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usually far away from the amenities you want when you are old (such as hospitals and grocery stores that are not 20 miles away).

Hospital and Walmart within five miles. Bedford township is building a retirement community now with attached condos. What costs $320,000 here costs $450,000 there and our taxes are half of yours.
 

Michigander

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Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
Hospital and Walmart within five miles. Bedford township is building a retirement community now with attached condos. What costs $320,000 here costs $450,000 there and our taxes are half of yours.

Well nananana boo boo

Bet those condo fees are high though. People forget the cost of those quite often when they just look at the price.
 

A K

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Jul 31, 2013
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Maryland
It is pretty market specific about whether the prices are nearing pre-crash or not. My market has mostly far exceeded it and there is a lot of money being paid, but no inventory (which is really hurting). No one will take house sale contingencies in my market, so people won't sell because they are afraid if they do, they will be priced out of a house they want and will have sold their house with no place to go.

The way I see it there is always inventory if the price is right.
 
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