Here’s an email I received from a reader last week:<\/p>\n
Clearly Seattle (and many other cities) are lagging the hottest markets in the housing bubble burst and in Seattle at least one thing that’s perpetuating the bubble and keeping prices up is a remarkably low inventory. So the question is: why is inventory so low? The bulls would say it’s high demand (new jobs, inflow from CA, etc) combined with low new listings (“Seattle is such a great place to live people don’t leave”) All this doesn’t pass the smell test. I wonder if new listings aren’t low because increasingly, more and more people aren’t becoming “trapped” in their houses. I’m not just talking of those with exotic mortgages and negative equity or adjustable loans on the verge of resetting here. Normally, in a healthy market, besides those forced to sell (divorce, job loss, etc) there is a lot of “discretionary” selling for many reasons.<\/p>\n
I wonder if the discretionary selling isn’t now falling because:<\/p>\n
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- Rising interest rates reduces discretionary selling since it would force people to buy a new home at newly higher interest rates. Since so many people are maxed out on their current mortgage there’s not way they could afford to move without a major “step down”.<\/li>\n
- The rapid increase in property values and the concomitant meteoric rise in property taxes means that anyone moving now will immediately “reset” to the current higher tax bill.<\/li>\n<\/ol>\n
It would be interesting to hear why inventory is low from other readers perspectives.<\/p><\/blockquote>\n