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VOL. 131 | NO. 94 | Wednesday, May 11, 2016

Impact of Low Housing Inventory Spreads to Home-Staging Business

By Madeline Faber

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The low inventory of single-family homes means prices are higher and homes are selling quicker, but also that fewer people are dressing up their homes to make them more attractive to potential buyers in the market.

Heidi and Jeff Ross are Memphis franchisees of Showhomes Home Staging, a staging company started in 2008. In the past two years, their company has added a new service, known as traditional home staging, and added other services to make up for slower demand for staging.

“Things are selling fast because here’s less inventory,” Jeff Ross said. “Our best year was in 2012, when inventory levels were very high.”

When inventory levels were higher, there were fewer opportunities for home managers because home sales were down. So Memphis Showhomes dialed back its home manager service in favor of the traditional home staging service.

A “home managers” service involves two parties – a family looking to sell a home and another family in transition. The latter moves into a vacant home with their own furniture and pays about a third of what it would cost to rent the house until it sells. The home manager pays utilities and helps keep insurance premiums stable because the home stays occupied.

Home managers could be families looking to move to Memphis and wanting to test out the area, or a family that sold their house quicker than expected, or a couple that split possessions and property in a divorce.

With a traditional staging service, the company brings in furniture from an off-site warehouse and styles homes for sale.

That staging service had become more successful for Memphis Showhomes than its original home managers business. With limited inventory, homes don’t stay on the market very long, so there isn’t as much of a need for a staging business. Memphis Showhomes can execute a traditional staging in a few days while it takes a home manager a couple weeks to settle into a home.

There were only 790 homes in new housing inventory at the end of the first quarter of 2016, accounting for nearly a year’s worth of new home sales, according to real estate information company Chandler Reports, chandlerreports.com.

A lack of inventory is tied to the availability of developed lots. With a recent uptick in the sales market, Shelby County homebuilders have worked through the surplus of lots that predated the recession.

“We went through an unfettered boom in 2005, 2006 and 2007, and land costs were just going crazy,” said Keith Allen, president of the West Tennessee Home Builders Association. “Now we went through seven to eight years of no development, and I think demand is starting to come back.”

Memphis Showhomes works mostly with existing homes across Collierville, Germantown, East Memphis, Lakeland and Cordova.

“When things are selling so fast like this year and last year, it’s hard to keep home managers in our program. They’re moving in and moving out in 30 days,” Jeff Ross said.

A home manager is more worthwhile for homes that are lingering on the market, Heidi Ross said.

“Putting in a home manager takes two to three weeks,” she said.

In 2012, which was the best year for Memphis Showhomes, the average home in the Memphis MSA stayed on the market for 114.5 days before selling, according to Memphis Area Association of Realtors data. In 2015, the average time on the market was only 78 days.

With both business models getting crunched due to market conditions, Memphis Showhomes has started doing small-scale renovations, and recently added painting and carpeting services as well as “mini-makeover” consulting services.

“We’ve added those other services to keep our name in front of Realtors,” Jeff Ross said. “We’ll be up year-over-year because we’re diversifying. But we need to see more inventory.”

PROPERTY SALES 28 290 16,197
MORTGAGES 33 165 10,087
BUILDING PERMITS 184 608 38,544
BANKRUPTCIES 33 125 7,597