Economists had been hoping for a spring rebound in the U.S. housing market. While the recent data shows some improvement, it’s far from the strength economists had hoped to see.
Recently NAR chief economist Lawrence Yun said that home sales should have been stronger because of population growth, but that hasn’t been the case, instead prices have climbed faster because of tight inventory.
“The lack of inventory is a key issue in this recovery cycle,” writes Mark Fleming at CoreLogic.
There are about 2.3 million existing homes for sale as of April. But there are “even fewer homes for sale that do not suffer from housing obsolescence — properties that are no longer desirable because their characteristics do not match what buyers are looking for in a home,” writes Fleming.
These include homes that are in no locations that are no longer popular or in neighborhoods that don’t have amenities that people want.
This means that the inventory of homes for sale that buyers actually want are even less than the about 2.3 million existing home inventory.
“Just as shadow inventory is the stock of properties in delinquency or foreclosure that are not yet for sale, these buyers waiting in the wings are the new ‘shadow demand,'” writes Fleming.
In 2007, there was hardly a difference between the days on market (DOM) for sold homes and the active (existing) inventory. The higher the ratio, the longer the DOM of all homes on the market, compared to DOM for sold homes.
This chart shows the rise in housing obsolescence since the financial crisis. While the ratio of DOM for all homes to sold homes is coming down, its still much higher than 2007 levels.
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