This year has seen a dramatic reduction in inventories of homes listed for sale as well as a significant spike in prices. Below are some specifics that will illustrate this change as well as some other observations about this marketplace.
Median selling price of free-standing homes.
From January through November the median selling price of a free-standing home has risen from $120,000 to $149,000. All of that change has occurred since March, this year. Prices have not been at this level since March, 2009. To give this some additional perspective, the median sales price in June, 2006 was $319,000.
Dramatic reduction in distressed sales
June of this year the number of homes listed as distressed sales, including short sales as well as foreclosures, was 8,889. As of December 11, that number is 1,396.
Community perspective
As I updated all the monthly sales figures for the major planned communities in this area I was struck by the contrast between the strong sales of the past three months compared to the low inventories of available homes. As a typical example, Silverado Ranch has had 133 closings over the last 90 days, but only has 33 homes currently listed for sale. This is illustrative of the local market.
Why the low inventories?
There is the seasonal factor. Historically, inventories are lowest in December. That, in my opinion, only explains a small fraction of this decrease. Secondly, there is the effect of what is called the “robo signing law”, discussed in earlier posts, that became law in the fall of 2011. This law made it much more difficult to foreclose. Notices of defaults went from several thousand every month to several hundred.
The big question is what has happened to those homes and mortgages that were in reality in default? Some probably have sold as short sales. What about the rest? Is there a shadow inventory of homes that will eventually flood the market? I have been hearing about a shadow inventory for a couple of years now. I honestly do not know if it exists and I also do not know that even if it does exist if it would make much difference in this marketplace, . The strong present demand could very well swallow it up.
The third reason for low inventories, in my opinion, is that many of the homeowners that are not in default are still “underwater”, owing more on their homes than they are worth. That in effect freezes them in place. They may want to move away or move to larger or smaller homes but can’t without coming out of pocket with money they likely do not have.
Seasons greetings!
Happy holidays and best wishes for the coming year.
