The ongoing housing market recovery in the United States should be in the midst of a boom, but a shortage of home supplies is holding it back. Springtime is traditionally a busy time for the real estate industry in the U.S., but current low levels in the inventory of listings could dampen the recovery efforts. Such are the observations by news agency Reuters and real estate analytics firm Redfin.
According to Reuters, the number of previously owned properties on the market these days stands at 1.94 million, which is estimated to represent around 4.7 months of supply. A balanced real estate normally expects six months of supply to accommodate demand. The inventory of newly-built homes is equally insufficient at 4.4 months.
Demand Outpaces Supply
Forecasts announced by the National Association of Realtors estimate that 5 million homes will be sold in 2013, which would represent a seven percent increase from 2012. Healthy demand is evident in certain regional housing markets such as Phoenix, Miami and Southern California, where some sellers are enjoying multiple bids from motivated buyers.
In what seems to be a clear case of demand outpacing supply, some listings are entering the market and exiting in just a matter of hours. According to Glenn Kelman, Redfin’s CEO, inventory levels in New York and the coastal neighborhoods of California are down to just one month. Diminishing inventories are starting to be observed in Atlanta and Philadelphia as well.
Investors Compete Against Average Home Buyers
In this seller’s housing market, some unexpected players are jumping into the real estate game. Wall Street investors are scooping up scores of homes in regions where the rental market is blossoming. After running through markets such as Phoenix like Tasmanian devils with their big wallets, investment banking firms are setting their sights on neighborhoods in Atlanta.
The shadow inventory of distressed properties and real estate owned (REO) portfolios does not seem to be helping. Real estate analytical firm CoreLogic estimates that the shadow market is down to 2.2 million from 3 million in 2010. Though some foreclosures are coming to the market and banks are more supportive of short sales, their pace does not seem to match the expectations of buyers and investors.
Real estate inventories are expected to remain at low levels in the months to come, but economists remain optimistic of the ability of the U.S. housing market to recover at a gradual pace.