2013: The Year of the Inventory Impasse

by Tim Ellis | 6 Comments

A few weeks ago we raised the alarm on new listings, which were down 30% from a year earlier after the first two weeks of January. Things have gotten slightly better since then, but the number of new listings is still down 18% in the first five weeks of 2013 compared to the same period in 2012. However, that one number doesn’t really tell the whole story.

As it turns out, new conventional listings from regular home-owners (i.e. neither bank owned nor a short sale) are actually up 2% from 2012. Meanwhile, new short-sale listings, where the seller usually stops paying his mortgage and asks the bank to let him sell the home for less than he owes on the mortgage, are down a whopping 54%. Bank-owned listings, where the bank has foreclosed on the mortgage and is now attempting to sell a repossessed property, are down 46%.

The reason there are no listings is because market conditions no longer compel many people to sell. Homeowners who don’t need to sell are still holding out for higher prices, leaving buyers who are hungry to snap up homes at near-bottom prices and crazy low interest rates with very few homes to choose from. 2013 is shaping up as the year of the inventory impasse.

Change in New Listings 2012-2013 by Type

You would think that as prices rise, more sellers would list their homes, leading to increasing inventory, but It turns out that after falling so far, so fast, a market with rising prices is actually causing a temporary inventory shortage. Prices have gone up enough to stem the tide of short sales and bank-owned homes, but not enough to bring out the pent-up supply of would-be home sellers who have been sitting out the declining market. Not only that, but the easing of requirements for the federal government’s Home Affordable Refinance Program (HARP) has allowed many underwater homeowners who might have previously ended up in a short sale or foreclosure to instead refinance and stay in their home over the past year.

Fortunately, this situation is likely to be only temporary. In markets like Phoenix, Las Vegas, and SoCal’s Inland Empire, where prices fell the hardest but then began to recover more quickly in 2012, non-distressed inventory is up double digits:

Market Overall non-distressed short sale bank owned
23-Market Total -17.9% 2.3% -54.0% -46.2%
AZ | Phoenix -14.4% 35.0% -61.2% -62.2%
CA | Inland Empire -29.5% 15.8% -65.8% -51.4%
CA | Los Angeles -26.7% 4.0% -66.5% -57.8%
CA | Sacramento -34.7% -20.7% -68.2% 5.6%
CA | San Diego -23.2% 7.1% -60.3% -59.0%
CA | San Francisco -37.5% -0.2% -73.8% -69.1%
CA | San Jose -31.6% 4.8% -81.7% -69.6%
CA | Ventura -26.4% 11.2% -65.5% -59.3%
CO | Denver -23.7% -7.8% -60.2% -67.6%
DC | Washington -12.8% -2.9% -43.2% -30.7%
GA | Atlanta -29.4% -3.9% -73.8% -22.0%
IL | Chicago -11.3% -4.8% -12.0% -31.2%
MA | Boston -14.6% -8.3% -59.8% -37.5%
MD | Baltimore -1.4% 0.4% 8.2% -16.9%
NC | Raleigh-Durham 3.7% 5.3% 17.5% -37.8%
NV | Las Vegas -33.9% 36.2% -75.9% -39.8%
NY | Long Island -14.1% -11.3% -39.1% -27.9%
OR | Portland -11.3% 15.3% -57.9% -46.4%
PA | Philadelphia -5.7% -1.8% -25.2% -22.1%
TX | Austin -7.1% -1.0% -38.2% -46.8%
TX | Dallas -9.9% 0.1% -42.0% -29.4%
TX | Houston -5.2% 1.6% -31.0% -46.9%
WA | Seattle -1.7% 13.6% -15.1% -29.4%

In about half of the markets we serve, non-distressed inventory is actually up from a year ago, and most of the other half are only down by single digits. If prices continue to rise, we expect new listings in most markets to move back into the black.

If you’re considering selling your home, you might be able to get a head start on the competition in most markets if you list now, while non-distressed inventory is still basically flat. If you’re trying to buy a home, take heart, there is still hope for decent selection in 2013.

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