The Clearwater and Tampa Bay housing market is improving but not as fast as many thought it would. One reason may be because there may still be a phantom inventory of distressed sales which is keeping the equity sales prices of other homes down. Of course if varies from place to place, but is it really there? The answer is by and large, no.
A phantom inventory of homes are homes that were in foreclosure and are now owned by the bank. At its peak, some of the biggest lenders own as many as 700,000 foreclosed homes that they were not offering for sale. That means they were hidden. Of course, foreclosure activity has also slowed. It’s still running two to three times higher than normal, but it has slowed to about 50% of the peak of the worst of the market just a few years ago.
But how can there still be a phantom inventory if there is such a shortage of distressed properties? Wouldn’t banks want to finally unload all of those properties and get them off their balance sheets? Of course they would, and they have.
How do we know? Lack of inventory is the biggest problem in the housing market in many places in the US (and is truly a problem in Clearwater and Tampa Bay where we work). It is causing prices to rise, which is good for sellers, but is also freezing first time home buyers out of the market. Inventory fell 9.3% at the end of December, 2013 which translates into about a 4 to 5 month supply. A normal market is a 6 to 7 month supply.
Sales last year shifted to more conventional sales over distressed sales. Smaller builders didn’t make it through the recession and that means fewer new construction homes nationwide as well. In this atmosphere, banks and lenders would certainly not hold onto properties that they know they can finally sell. The phantom inventory has shrunken and the effect on equity prices is that prices are up.
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