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It's all about the inventories

The old adage of “what goes up must come down” is perhaps the most appropriate for the housing market’s behavior over the past year. Thanks to the federal homebuyer tax credit expiration last fall then its subsequent extension/expansion in the spring, getting a handle on market conditions for housing has been difficult. Nonetheless, the body of evidence points to some significant inventory problems that will prevent the market from returning to ‘normal’ anytime soon. The inventory of new homes available for sale has declined to nearly a 30-year low, but as of May a newly-built single family home had spent an average of more than 14 months on the market due to the enormous volume of distressed sales (i.e. foreclosures and short sales). Perhaps the biggest concern for the housing market going forward is the shadow inventory, which is represented by homes with seriously delinquent mortgages or those that are already foreclosed but not listed for sale. By some estimates, the shadow inventory actually could exceed (or even be twice as large as) the total number of existing homes available for sale, a situation that certainly does not bode well for prices and construction activity


Posted 06-24-2010 4:08 PM by legob
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