If you’ve read anything at all about housing this year, you’ve read that the housing market is “improving”. Offered up as evidence is the fact that inventories have been falling across the nation. Clearly buyers are snapping up properties again, right?
Sales have improved in a number of markets — for example in Phoenix sales were down only about 10% YOY in March which is still above the lows of the bust years — but that’s not the entire picture. For some reason new listings (not total listings but the ones added during the month) have been dropping for the past couple of years and are now at their lowest point in 12 years:
New listings are down 23% from last year, and 35% from 2010.
So what happened? We know that a lot of potential sellers have kept their homes off the market waiting for the market to come back. Are they still staying on the sidelines? We know that the “robo-gate” scandal slowed down the rate of foreclosures—are there fewer REOs for lenders to sell? That might be a factor, but listings were dropping before that all hit the fan. Are lenders keeping more in “shadow inventory”? Depending on who you talk to, estimates range between 1.5 M to 3 M homes are going to be foreclosed on in the next year or so. Those may not yet technically be REOs, but if lenders are not foreclosing when the mortgage hasn’t been paid in years, then the property is a “REO-in-waiting”, a property that would traditionally have been foreclosed and on the market by now, so maybe this is a factor.
I frankly can’t explain why new listings have continued to drop. I do know though that the falling inventory isn’t as positive a sign as many are believing it to be. Until sales and listings are back to more traditional levels, the market remains a mess. For further insight consider:
US News & World Report (4/10 ’12): How ‘Shadow Inventory’ Hurts the Housing Market — While it’s bad for broad recovery, inventory is great for buyers