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What’s up with the low inventory?

Yeah, yeah, yeah inventory is low.  We’ve heard that for months and even years here. But why? Well, it’s because of the “perfect storm” of inventory limitation. Not in any particular order:

Homeowners that refinanced are staying put

Any intelligent homeowner refinanced when rates were REALLY at historic lows in 2021 and early 2022.  Those folks don’t want to sell now and incur a much higher rate on a new home purchase. If they’d like to upsize to a bigger place for their growing family, it may not make financial sense with a huge increase in their monthly payments due to a much higher interest rate. And if “empty nesters” want to downsize, it doesn’t make financial sense for them either as the difference in their current interest rate versus a new one may raise their monthly payments significantly for a much smaller home. So they’re just staying where they are.

Supply chain issues for new construction

It’s taking longer and is much more expensive for builders to complete new housing projects. It’s getting better, but if the builder or consumer is insistent on the “original specs” of the home (including appliances, finish materials, etc.) it may take months longer to finish a build.

City zoning issues

As you drive around the valley you’ll see lots of open land (though much less than when I moved to California in 1984). Much of the available land is not zoned for residential construction, and it is a logistics and political nightmare for cities and counties to get parcels rezoned for residential housing development. In many cases, it takes a proposal by a landowner, planning and building department reviews, public debates, and eventual city council approval to change the zoning. It can take years.

Empty office buildings are not being converted

Depending on the age, style, and core of a building, it may be cost prohibitive to convert commercial buildings to residential. Space for cubicle farms and offices is much easier and cheaper to build than are individual living spaces with unique HVAC needs, kitchens, bathrooms, etc. It’s not likely we’ll see these conversions on a large scale.