Positive real estate news and the second “shadow inventory”
My inbox is full of positive news this morning:
- December home sales trended upwards from the previous year.
- Home builders’ optimism score is higher than it’s been in the past two years.
- Core Logic’s chief economist says housing will turn the corner in 2012, citing “a quarterly survey by the New York Federal Reserve Bank, which shows total household debt continues to decline. At the same time, consumer sentiment rebounded strongly in the latter part of 2011, posting a six-month high in December – an indication that consumers’ confidence in the strength of the economy is growing.”
- Sales of resale homes rose in December for the third month, driving the supply of homes on the market to the lowest level since 2006.
This is all great, and as I’ve been saying there does seem to be an infusion of optimism that will help to motivate prospective buyers to venture back into the housing market. Our local Triangle MLS statistics bear this out, with the lowest supply of homes at the end of the year than in the previous three years (Source: Stacey Anfindsen, Triangle MLS)
We do have a “shadow inventory” of homes though, and I don’t mean the foreclosure backlog that everyone is talking about. I mean that shadow inventory of sellers who would like to sell but have decided to wait until the market turns around.
As the reality of current home prices started to settle in over the past few years, home sellers were weren’t forced to sell for one reason or another pulled their homes off the market to wait for a better time to sell. As homes begin to sell, this shadow inventory will emerge and add to the supply of homes to offset the growing demand of prospective buyers which will keep home prices relatively stable. This is good news for home buyers and should encourage more of them to venture into the pool of homes. But home sellers will need to continue to be realistic in their expectations for the next few years.
It will be interesting to see how this balance plays out, and every neighborhood and community will be different. But the growing optimism and positive news will be a great help to the overall health of the economy in general and housing in particular.
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