The market can’t clear when new distressed supply is hitting faster than the distressed supply is leaving – remember less than half of CA sales in Feb were from the distressed stock.
Yes, “listed” inventory is way down. Pundits use this metric as leading evidence that the housing market has nowhere to go but higher. Obviously, they will not mention the millions of houses barreling down the foreclosure pipe — and the approx 125k that enter the pipe every month — of which the vast majority will end up as inventory through foreclosure, deeds-in-lieu or short sales
But aside from the shadow inventory, the lack of organic inventory (natural sellers) is not a positive. Homeowners are trapped. In strong real estate markets homeowners selling and moving drive the market but in this market, epidemic effective negative equity prevents most from selling and re-buying.
**Remember, effective negative equity does not begin at the point in which somebody owes more on their house than what it’s worth. It begins at the point at which they can’t pay the Realtor and put a down payment on the new prop.
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