US Housing Inventory Struggles with Lack of Attractive Homes

The US Housing inventory is finally falling after years of an oversupply of homes, but unfortunately this isn't good news, and as a report in the Wall Street Journal points out it just highlights yet another problem, which is the lack of attractive homes for sale.

At the end of September there were over 2.19 million homes for sale according to data from realtor.com which is 20% less than September 2010, and is the lowest level of homes for sale since the website began keeping records in 2007. In a normal housing market a falling inventory would lead to increased demand and increased prices, but the US housing market is still a long way from returning to normality.

Real estate agents are seeing people take their homes off the market as they are choosing not to sell them at heavily discounted prices. Although there are fewer foreclosures on the market as banks are choosing to delay taking back properties, there is still the worry of the shadow supply of distressed property which is currently estimated at being over 1 million, and this is suppressing demand. The likelihood is that the shadow supply will constrain price gains during the next few years.

The report in the Wall Street Journal also highlights the fact that the decline in the inventory can lead to fewer opportunities for buyers and sellers to come to an agreement. It makes the point that sellers could feel they are underpricing the homes, while buyers are afraid about overpaying. Real estate agents are having trouble sourcing enough quality properties for potential buyers to view, and even though mortgage rates are at a historic low, there are 3% less applications than a year ago.

According to Realtor.com, inventory levels are down by a massive 49% in Miami, while in Phoenix they are down by 48%, and by 46% in Orlando.