One barometer that housing "experts" use to say whether the housing market is
recovering is the available inventory of homes for sale. The greater the number
of homes on the market the longer it takes to sell...Thus the worse the market
is. A balanced market (one that does not favor the seller or the buyer) is one
with a six month supply of homes on the market.
So, I was intrigued when I read an article in the Wall Street Journal the other day that said home inventories are decreasing nationally. Is it because the market is recovering or for other reasons?
I looked it up and the available homes for sale in the month of July 2011 versus last year was down 26.5%. I thought WOW that is a large number. It was looking very promising....
I then checked the months supply of homes on the market and was impressed to see it was down 15.7% from last year.
Then I decided to check home prices versus last year at the same time. Now, with inventory levels down the average home price should be up. (it might be a little to much to ask for 20%). But here was hoping... What I found was home prices actually dropped on average 1.7% from last year.
The numbers are saying mixed reviews. If inventory levels are down then home prices should be up. However; that is not the case. As I divulged a little farther you find that bank owned homes made up almost one third of the sales for July. in the peak of the market and when the housing market is good that number is probably closer to 10% or less...
Why does that make a difference? The banks will not generally do any repairs to a house and sell the home in it's current condition. Thus there sale price reflects the house in need of some repairs or cosmetic fixes that affect the value of the house and have priced the house according to that..
Whereas; a seller selling a home will have the house in a condition that allows the buyer to move in with minimal or any repairs. Thus they can command a higher price for the house.
With the amount of homes on the market decreasing there is a dual look at this. Most experts feel it is because of all the issues with foreclosures that banks are being more cautious on them and taking longer to actually foreclose on a home.....And with foreclosures so high rental demand has increased to such a point that it is driving up the rental rates.....
The increase of rental rates has spiked for me first time buyers out looking at homes. because now what was once affordable rent is no longer that and they can own a home for less than they are paying in rent.
Those factors are having an dual impact on the housing market. You are finding more buyers looking as their rental renewals are increasing and looking to see what options are available and sellers who can afford their mortgage payments but owe more than their home is worth are taking them off the market....
Either way, with decreased inventory levels the demand is starting to increase on existing homes on the market. That is a good sign for the housing market as a whole in the Charlotte, NC. region.