Housing Inventory Issues…..
by Tom on January 24, 2009
in Market Musings, house prices
Tom here – this story at Calculated Risk is another example of why the housing inventory issues aren’t going to go away soon. Let me explain:
- There are so many foreclosures, the banks can’t get them all on the market.
- There are many “accidental” landlords who are renting houses they can’t sell until the market turns around. At the first sign of “life” in the market, they are going to flood the market with more homes.
- There are many “regular” sellers who are going to wait until the market turns. These too will fill the market with more homes.
So, the housing inventory problems aren’t going away any time soon.
Calculated Risk: Housing and “Ghost Inventory”
RealtyTrac looked at listings in four states, California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database.Usually most REOs (lender Real Estate Owned) are listed pretty quickly, although lenders typically clean up the properties and sometimes do minor repairs before listing the property, so there is some lag between foreclosure and the property being listed. The size of this “ghost inventory” is unknown.
I’ve also heard a number stories of lenders delaying foreclosures, probably because they are overwhelmed right now. This is another type of potential “ghost inventory”, although many of these properties might already be listed as short sales by the owner.
There is also a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market – so for all these reasons, existing home inventory levels will probably stay elevated for some time.
Tom,
All real estate is local. Some areas will be plagued by excess foreclosure inventory, other areas will absorb that foreclosure inventory just fine. Let’s not paint too gloomy of a picture here!
Vance,
You’re right, all real estate is local and to that point, some markets will be plagued by excess foreclosure and delayed seller inventory longer than others.
However, I do believe that to some extent, all areas are going to see the inventory issues, it’s just that some of them will see it more than others.
Does that make sense?
Tom
Tom,
It makes perfect sense. The greatest impact will be on buyer attitudes toward negotiation. Buyers will expect that all sellers everywhere are in the same predicament – a strong buyer’s market – and will bash sellers unmercifully. I’ve already experienced buyers who have lost great opportunities by believing everything they read about the market and push the limit of sellers – who end up accepting another less-aggressive offer.
The principle will be in effect pretty much every where, it’s just the degree that it will impact certain markets and even niches inside those markets will vary.
I heard once (don’t know if it’s still true) that there is a 5 year inventory of condos for sale in the state of Florida. In my “area” there is a 14 year inventory of residential lots for sale. In some other areas, not so much.
Tom