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Inventory Levels Easing As Home Prices Rise, Negative Equity
Retreats
http://www.forbes.com/sites/morganbrennan/2013/06/14/tight-housing-inventory-levels-ease-as-
home-prices-rise-negative-equity-retreats/
June 14, 2013
For months the pool of available homes has dramatically dwindled
as more buyers have jumped into the
recovering housing market. Burgeoning demand for that shrinking
supply has fueled home price
increases across most of the U.S. and in the most sought-after
areas, full-fledged bidding wars amid
claims of nascent housing shortages.
Now that inventory crunch is beginning to ease. More owners are
starting to list their homes for sale,
according to Realtor.com. The San Jose, Calif,-based listing
site, owned by Move MOVE -1.09% Inc., says
listing inventory has surged 25% since the start of the year,
outpacing seasonal increases associated with
the Spring/Summer selling season. In May inventory levels grew
by nearly 6% from April, to about 1.85
million homes for sale.
Overall, were seeing seller confidence beginning to respond to
consumer demand, said Steve
Berkowitz, chief executive of Move, in the report. Nationally,
there are more homes going on the
market for a shorter amount of time. And this is happening in
our hot markets on a much larger scale.
Confidence among prospective sellers is rising. A recent survey
from Fannie Mae found that 40% of
Americans believe now is a good time to sell. Thats up from 30%
a month ago and 16% a year ago.
In markets that Realtor.com refers to as previously hot like
Sacramento and Stockton, Calif., a wave of
newly listed homes has begun replenishing inventory levels.
Sacramentos available inventory swelled
35% from a month earlier while Stocktons surged 37%. Other areas
welcoming more listings are
Daytona Beach, Fla. and Washington, D.C., with inventory jumping
nearly 22% and 13% respectively.
A major catalyst propelling more homes onto the sale block is
prices. April home prices were 12% higher
than a year ago, according to CoreLogic CLGX -0.5%, an Irvine,
Calif.-based data firm, marking the 14th
straight month of price gains. Of the top 100 metro areas, 94
logged year-over-year increases. In turn,
homes are hitting the sale block with higher price tags:
nationally, homes listed for $199,000 in May, or
nearly 5% more than they did last year, according to
Realtor.com.
http://www.forbes.com/sites/morganbrennan/2013/06/14/tight-housing-inventory-levels-ease-as-home-prices-rise-negative-equity-retreats/http://www.forbes.com/sites/morganbrennan/2013/06/14/tight-housing-inventory-levels-ease-as-home-prices-rise-negative-equity-retreats/http://www.forbes.com/sites/morganbrennan/2013/06/14/tight-housing-inventory-levels-ease-as-home-prices-rise-negative-equity-retreats/http://www.forbes.com/sites/morganbrennan/2013/06/14/tight-housing-inventory-levels-ease-as-home-prices-rise-negative-equity-retreats/http://www.forbes.com/sites/morganbrennan/2013/06/14/tight-housing-inventory-levels-ease-as-home-prices-rise-negative-equity-retreats/
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That upward ascent has a ripple effect, lifting the values of
nearby homes and entire neighborhoods.
This in turn has been helping more homeowners climb out of
negative equity. Negative equity, or
underwater mortgages, refers borrowers who owe more on their
mortgages than their home is worth.
One of the major reasons inventory has been so contracted is
that millions of homeowners have not
financially been able to offload their homes without taking a
loss, be it an out-of-pocket expense on the
loan at closing or a credit loss associated with a strategic
default.
But as home prices rise, more borrowers become right-sided on
their mortgages. CoreLogic reports that
850,000 homeowners returned to positive equity in the first
quarter of 2013, bringing the number of
underwater homes down to 9.7 million from 11.4 million over the
same period last year.
High negative equity had a lockout effect on homeowners by
making it harder to participate in the
home sale market, but the rise in prices is in the early stages
of providing relief to tight supplypressures, explains Sam Khater,
deputy chief economist of CoreLogic.
He says unsold inventory rose 22% from the start of the year
through April. Thats twice the typical
average yearly increase and the third highest national increase
since the early 1980s.
Still, at 1.85 million homes, available housing stock remains
constrained by historical standards and
remains 10% lower than this time last year, according to
Realtor.com.
But the uptick in listings hints that the market may slowly be
moving toward a more sustainable balance
between supply and demand. While we expect strong price growth
in the near term due to still -tight
inventory, we expect that growth to decelerate by the end of
this year and into next year as inventory
begins to rise and ease the tight supply pressures, projects
Khater.
In the meantime, realtors say homes are coming on and off the
market at rapid pace. Across all of the
markets that were looking at, 22% of the homes that sold in the
past 30 da ys were on the market for
less than 7 days, asserts Lanny Baker, chief executive of
ZipRealty ZIPR +1.61%, an Emeryville, Calif. -
based national real estate brokerage. Consumers see signs go up
and signs come down and that makes
people feel very different about the market than, say, 12 months
ago when signs would go up and stay
up.
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ZipRealty compiles data for the 24 metro markets in which it has
a presence. In April sales prices rose
more than 16% from a year earlier, says the realty firm, with
most homes selling near their full asking
price. This in turn is beginning to fuel more listings: the firm
says it has tracked an 8% increase in the
number of homes for sale year-over-year. Yet, with more buyers
jumping into the market, the heated
sales pace still places inventory levels 30% lower than last
year in terms of months-worth of supply.
