Housing Supply Down, Prices Up

Home sales have now posted year-over-year gains in each of the last nine months. But in almost all of those months, the number of homes for sale has declined. On Thursday, the National Association of Realtors reported that inventories fell by 1.3% in March, leaving inventories 21.8% below their year-earlier levels.

Here are three reasons to explain why inventories have fallen:

With prices down by one-third from their peak (and by much more in the hardest hit housing markets), who wants to sell a house right now if they don’t have to? That’s especially true for the roughly 15% of homeowners who are underwater on their mortgage.

Banks have decelerated the foreclosure process after they were caught routinely passing off bogus documents to demonstrate ownership. That has slowed the pace at which they’re putting homes back up for sale.

While investors initially were buying up foreclosures that could be fixed and flipped, or resold, for a quick profit, over the past two years, more investors have been buying inexpensive homes that can be rented out. Those homes are out of the for-sale pool for the near-term.

For decades, Americans were told that the best and most reliable investment was buying one’s home. Then came the 2008 financial crash, which burst the bubble in housing prices and shattered the confidence of existing and prospective home owners. Now, amid the wreckage of the bust, is this a good time to buy?

2 thoughts on “Housing Supply Down, Prices Up

  1. Absolutely a good, scratch that, great time to buy . . . assuming you can qualify. Banks have choked off the supply of forclosed homes on the market leaving little inventory being sold. Due to short sales, there are even less homes that are being foreclosed on, however, there are still LOTS of foreclosures happening.

    If the banks continue to hold on to the REO’s add to the fact that those that did short sales 2 years ago are now eligble to buy – home prices will continue to rise. What I call “premium” homes in our area have already gone from $120 per square foot to over $130/sf with many homes in ready-to-move-in-condition being listed for over $160/sf. Yet a far cry from their highest sale price of over $300/sf.

    Buy now or cry later.

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