Shortage Of Homes to Buy May Last Another Year

Shortage of Homes For Sale to Continue Across Nation The real-estate story used to be all about prices, most recently, "When will prices stop falling and when will they rise again?"

Now the story is about inventory: When will more homes come to market, at least enough to meet the buyer demand? At least one economist is predicting that the "inventory bottom" could be a year away.

With so few homes for sale in many areas, real-estate agents have found that aspects of the bubble are back: multiple offers, sellers who will accept only cash and homes selling for more than asking price.

The boogeyman of the shadow inventory turned out to be much less than feared. Instead of the market being flooded with low-priced foreclosures, it has seen few homes for sale at all. The number of homes listed for sale was at a 13-year low in January, down about 25% from a year ago.

Trulia economist Jed Kolko is predicting it may be another year before the supply of homes for sale rises significant, he writes:

Now, the punch line: It could be at least another year until national inventory starts expanding. Of course, inventory will probably turn up this spring and summer because of the regular seasonal pattern, but the underlying trend will be less inventory than is typical for each season, not more. … Ultimately, the inventory turnaround will depend not only on how fast prices are rising, but also on whether prices will have been rising for long enough to encourage homeowners to sell and builders to build.

According to his analysis of recent data, the decline in inventory started shortly before prices hit bottom, with the sharpest fall just before and after that bottom. Then the rate of inventory decline slows, especially after a year of price increases.

However, he notes that cities such as Phoenix and Miami, where prices have been rising for more than 18 months, are continuing to see inventory fall.

Mike Simonsen,  Altos Research, cites three reasons for low inventory: lack of new construction, banks and homeowners holding on their properties just a little longer as they see prices rise, and mortgage-modification?n programs that keep people in homes that would otherwise go into foreclosure and then on the market.

Simonsen notes that homeowners are responding in a way that is just the opposite of what was predicted when the giant shadow inventory was foreseen. He writes:

"In actuality, it seems the psychology has been reversed: As prices have climbed, those who (still) own their underwater homes finally see light at the end of the tunnel. The longer they hold, the closer they are to recovery. Why sell now if you don’t have to? Maybe you’ll make it out alive!

Banks are acting similarly. The owners of underwater mortgages have no incentive to unload quickly. Their assets are appreciating. Furthermore, as home prices increase, fewer and fewer people are at risk of default. The shadow is shrinking in the noonday sunshine of rapidly re-inflating home values".


Do you have questions on the Bend Real Estate market? Contact Greg Broderick, Broker @ (541)280-2363 or (800)689-2363

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