Years of sustained low inventory seem to have finally caught up with the Louisville area housing market.
“You definitely have a shortage of inventory and especially in the most affordable price ranges,” Dave Parks, president of the Greater Louisville Association of Realtors, told Insider in a phone interview.
“If you have a shortage of the most affordable housing, that is going to put the most downward pressure” on homes sold, he said, because those are the ones that sell the most.
Home sales in the Louisville MLS declined more than 8 percent in May, with 145 fewer homes sold during that month, despite increased competition. The average house and condo spent 51 cumulative days on the market in May, down from an average of 74 days just two years ago.
The number of days houses spend on the market is even lower for those priced between $125,000 to $250,000 and located inside the Gene Snyder Freeway, Parks said. He estimated that those homes spend less than a month on the market before they are snatched up by an eager buyer.
May was the second month this year where home sales declined and the first month that overall home sales for this year declined. The number of homes sold from Jan. 1 through May 31 decreased 1.1 percent, or by 77 homes, compared to the same period in 2017.
During the month of May, the number of active listings declined 8.1 percent.
The Louisville area is expected to get a little relief when it comes to available inventory. Pat Durham, executive vice president of the Building Industry Association of Louisville, said in a news release that new construction is estimated to grow 15 percent to 20 percent in 2018 compared to 2017.
However, Parks told Insider that Louisville needs to see 10 percent to 15 percent growth in new construction year after year for the next five years to fill the pent-up demand.
In addition to building $300,000-plus homes, the market also needs builders constructing houses in the $170,000 to $225,000 range; currently, that is “extremely, extremely limited,” which “chokes off that part of the market,” he said.
Because of competition and a lack of available inventory, buyers often have to make offers on six to seven houses before one is accepted, Parks said. “Buyers are frustrated.”
Although the number of houses sold in May was down, Parks said there are still lots of sales taking place and plenty of buyers searching for their first or next home.
People seem willing to pay higher prices to secure the home that they want. The average home sold for nearly $217,000, up 2.2 percent compared to May 2017.
With the city expected to continue growing in population and popularity, buyers will have to get accustomed to new normal prices in in-demand areas.
“You can tend to think ‘How can a $200,000 shotgun in Germantown — How can you get a good return on your investment?’ ” Parks said. “You might have a little bubble there, but over the long term, all the demographic trends say that metro housing that is near the city, that is updated will be in demand for a long time.”