Home sales are up, home building is up. Can home prices be far behind?
That depends on how many homes come on the market as owners deal with defaults, pay cuts and job losses. This “shadow inventory” will create new downward pressure on home prices.
For now, the data suggest home prices are flattening out. The S&P/Case-Shiller 20-City home price index for June, released Tuesday, was down 15.4%year over-year, better than the 16.4% fall expected by economists. The index increased 1.5% from its May level, which was up 0.5% from April, the first back-to-back increases since the summer of 2006. Stabilized home prices are considered imperative for financial markets to mend totally and consumer wealth to stop falling.
But it’s “too soon to call this a turning point,” cautioned economist and the index’s co-developer, Robert Shiller, during an S&P teleconference on home prices Tuesday.
One big reason is the millions of owners who want to sell their homes but are holding back because of low prices. Signs of a bottoming out may push them to enter the market.
And if inventories keep creeping up, house hunters will have little incentive to meet asking prices or create bidding wars. Buyers have to perceive a limited supply of homes before price increases can gain traction.
Clearly, demand has picked up since the spring, helped by greater affordability and the tax credit for first-time buyers. Existing home sales rose a strong 7.2% in July.
But inventory increased 7.3%, to 4.09 million, and the supply of homes for sales remained at 9.4 months. While that’s down from last winter, it is well above the normal supply of about five or six months.
And supply could keep growing.
“There appears to be a large “shadow” inventory of homes available for sale,” says Steven Wood of Insight Economics, the result of hesitant homeowners and financial institutions temporarily holding foreclosed homes off the market.
Notice the not-so subtle shift in the definition of “shadow inventory” in this article.
The term “shadow inventory” typically refers to homes in various states of foreclosure that would hit the market some point in the future.
This article also includes as “shadow inventory” future inventory from would-be sellers who are not putting their home up because prices are too low.
i.e. those that would put their house up if prices were higher.
This is not shadow inventory. It is simply an example of price elasticity of supply. In this example the supply could be highly elastic.
Notice the not-so subtle shift in the definition of “shadow inventory” in this article.
The term “shadow inventory” typically refers to homes in various states of foreclosure that would hit the market some point in the future.
This article also includes as “shadow inventory” future inventory from would-be sellers who are not putting their home up because prices are too low.
i.e. those that would put their house up if prices were higher.
This is not shadow inventory. It is simply an example of price elasticity of supply. In this example the supply could be highly elastic.
Notice the not-so subtle shift in the definition of “shadow inventory” in this article.
The term “shadow inventory” typically refers to homes in various states of foreclosure that would hit the market some point in the future.
This article also includes as “shadow inventory” future inventory from would-be sellers who are not putting their home up because prices are too low.
i.e. those that would put their house up if prices were higher.
This is not shadow inventory. It is simply an example of price elasticity of supply. In this example the supply could be highly elastic.
Notice the not-so subtle shift in the definition of “shadow inventory” in this article.
The term “shadow inventory” typically refers to homes in various states of foreclosure that would hit the market some point in the future.
This article also includes as “shadow inventory” future inventory from would-be sellers who are not putting their home up because prices are too low.
i.e. those that would put their house up if prices were higher.
This is not shadow inventory. It is simply an example of price elasticity of supply. In this example the supply could be highly elastic.
Notice the not-so subtle shift in the definition of “shadow inventory” in this article.
The term “shadow inventory” typically refers to homes in various states of foreclosure that would hit the market some point in the future.
This article also includes as “shadow inventory” future inventory from would-be sellers who are not putting their home up because prices are too low.
i.e. those that would put their house up if prices were higher.
This is not shadow inventory. It is simply an example of price elasticity of supply. In this example the supply could be highly elastic.
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