Flight delays and a little real estate inventory shortage.

Why is it called 'fast' bag drop?
Creative Commons License photo credit: Lars Plougmann

If you have done hard time at the airport this holiday season, you understand the laws of supply and demand. Airports are the poster children for the economy.

When we ran the post-Thanksgiving airport shuttle for Daughter #1, our mission was quite simple. Deliver her and her seventeen over-weight bags to Terminal 1, assist her with the check-in process (in which we stand several kilometers to the rear so as not to tip off other travelers that she in fact has parents), and then whimsically blow kisses and toss twenty dollar bills in her general direction as she breezes through security on her way back to the magical land of frat parties and higher learning (presumably in that order).

This is a process we have now repeated a half-dozen times, one that we have learned should take no more than 90 minutes, even on a peak travel day. But that was then. Now is a recession; everyone is tightening their belts, and by “everyone,” I am talking about Southwest Airlines.

During our latest outing, we arrived at the airport on cue, dressed in our proud-parent-of-the-college-student regalia and leaving the other, recreational travelers with the impression that the Mizzou mascot just gave birth to triplets. What we found as we arrived looking like we were ready to take the field at half-time was not the reasonable, 20-minute queue at baggage check but a line that extended around the building to, oh, Des Moines.  The problem here is that the ticketing counter which was designed to accommodate a dozen or more check-in attendants is now manned by one burned-out airline employee named Bob.

Times are tough. Demand is still there, but the airlines are struggling with profitability. They would like to offer more staff, but they can’t afford to, so Bob is the only show in town. This makes him a popular guy. And the result is that a lot of people are left waiting… and waiting.

Our local real estate market is suffering through its own supply and demand problem. Buyers are out there. Our own buyer clients are starting to resemble the air traffic circling O’Hare — or the activity in the check-in line. They are all packed with nowhere to go. Our shortage is inventory. Fewer listings, primarily a result of the home equity disappearing act of the past several years, means we are seeing a log jam of buyers, buyers who want mobility but find themselves in a holding pattern waiting for the next opening — the next Bob.

Here is what our Scripps Ranch inventory trend line looks like for the past two years. Note that number of listings is for all property types, both attached and detached, according to the Sandicor MLS.

SRInventory

By the numbers, we have only 54 active detached listings in Scripps Ranch this morning, this for a community of more than 8,000 detached homes. Only 22 attached homes are offered for sale through the MLS. In other words, for those looking to purchase, the cupboards are relatively bare.

A logical conclusion would be that prices, as a result, are going up. Here is what the median sale price for Scripps Ranch Homes (single-family detached) looks like:

SRMedSold

If you are a seller, you are probably yelling, “Yippee! When do we take off?” Not so fast. What this chart doesn’t show you is what that median price gets you.

In November, 2007, the median detached Scripps Ranch home was 2574 square feet, or $307/square foot. In November, 2009, the median detached home was 3210 square feet, or $267/square foot.

What about compared to a year ago, which is roughly the trough in my little graph? In November 2008, the median price per square foot was $272, which is slightly higher than the 2009 median for the month, yet total inventory is approximately 7% lower today. (Scripps is a relatively small sample, I know, but the trend is consistent with that of the entire I-15 corridor — I’m just too lazy to prove it.)

In other words, because of low interest rates and (arguably) government incentives, buyers are spending about the same on their 2009 home purchase as they were in 2007, but they are getting much more house! What this tells me (and I am certain you will correct me if you think I am all wet) is that we are far from out of the woods.

Higher demand, lower prices, and lower supply should translate to a price appreciation which we are simply not seeing. Take away the favorable interest rates, home buyer incentives, and a government buying loans like it’s a going out of business sale, and the picture would be much different. Keep the foreclosure and short-sale traffic coming, and things are dicier yet for the sellers.

As for the buyers? Hang in there. You are not buying a pair of shoes, and with patience, you will get your coveted boarding pass. New flights are arriving daily.

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