I came across two interesting articles today – One titled REO Inventory Posts Big Drop from a Year Ago and the other is Buyers Frustrated at Lack of Inventory. I think these two certainly mirror the other and a direct reflection locally on our market.
Starting with the low REO inventory – which REO translates to Real Owned by a Bank. This is not a short sale property where the seller is still on the deed – this is foreclosed property that the bank now owns and can sell as the seller. Much confusion between the two, even 5 years later from the beginning of the large impact of short sales.
The FDIC has reported that the amount of foreclosed homes on banks’ books has dropped by 18% in the last year, and that levels have been dropping since the third quarter of 2010. Martin Gruenberg, the FDIC chairman, stated that ‘levels of troubled assets and troubled institutions remain high, they are continuing to improve.’ The improvements are leading more banks to lend more – which lending rose 15% over last year.
Taking a look at our area, focusing on Navarre through 30A, south of I10, home sales only. In August of 2010 we had 169 bank owned homes in our MLS for sale, today we have only 58 homes to sell.
This drop in inventory discussed is only that of REO properties – we are seeing the inventory drop across the board. Redfin released a quarterly survey of 829 buyer’s attitudes from 19 cities and the following was found:
• 46% believe now is a good time to buy
• 61% believe prices will increase
• 62% “very interested” in conventional sales, up from 57% in the second quarter and 48% in the first quarter
• 31% would step back from competing against other buyers for a home, compared to 28% in the second quarter…….. These are multiple offer situations and obviously 69% will compete for they want! We are seeing it here continually and increasingly!
“Even as prices have begun to rise, the overwhelming issue for most of today’s buyers is the selection of homes for sale, not what they cost,” says Redfin CEO Glenn Kelman. “The value-driven investors scooping up foreclosures for pennies on the dollar have largely been replaced by first-timers seeking to buy a pretty house now when mortgage rates are below 4%. With so few houses for sale, many will come up empty. The only homeowners willing to sell now mostly are the ones who have to – for a job in a new city or for a new baby.”
Locally, our inventory has fallen to being just on the verge of back to a Seller’s market. We went from an 11 month supply of inventory, to now a 6.5 month supply. Once we hit 5.9, it’s a seller’s market – and it’s right before us. Remember, a seller’s market doesn’t indicate high prices, it’s lower inventory, less to choose from. This ultimately begins the rebound to a normal appreciation again.
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