Shadow Inventory - Heckle or Haunt?

It is about as scary as the Alien, and it is very much alive. Our real estate market is enveloped by “Shadow Inventory” which is ready to pounce on us at the first indication of a market rebound.

Most market news talks about the glut of foreclosures and short sales. They represent roughly 55% of the available homes for sale today. That number is miniscule compared to the pent up supply of equity sales which are poised to come on the market at the first sign of rising prices. For nearly the last three years, homeowners have been postponing the sale of their property because prices were falling on a daily basis. Many of them simply could not afford to sell. Families were in need of more space, empty nesters wanted to move to smaller homes, many wanted to rent instead of own, plenty of retirees were weighing their options, second homes were desired by some, and investment properties were still on the wish list. All these people delayed taking any action. Now, the shadow inventory is beginning to haunt!

The shadow inventory will continue to grow as homeowners bide their time. So, what’s going happen if it breaks free? I predict a flood of new, unexpected inventory as prices move upward. What will happen then? The new inventory will stall price increases and buyers will seize the opportunity at hand. Then, prices will begin rising again because of demand. We are about to find ourselves in new real estate territory. Stay tuned, have your checkbook ready, and keep an eye on the best deals. At some point, nearly one third of the Nation’s homeowners will be ready to sell and buy something else.

On the cusp of a Seller's Market

The O.C. market may have sagged as much as it is going to. Many would be buyers are under the false impression that the CA home sales statistics and trends are representative of what is going on in Southern CA. Just because a single family home has dropped to $200k in the Central Valley does not mean that similar bargains exist in Irvine. Actually, OC inventory of homes is falling rapidly and in many locales there are multiple offers. During the first four months of 2008, 1132 homes were sold under $350k. So far this year sales have reached 3638, which is an increase of 220%. Amazingly, there is only about 3 months of inventory under $350k, which makes it the beginning of a sellers market! It appears prices have stabilized in many of the popular neighborhoods. Record low interest rates are adding to the reasons for so many sales, and investors are jumping back into the market. If you are waiting for prices to drop further you may have a long, long wait! The challenge for some buyers now is not whether they will get a bargain, but whether they will get a house!