Why low inventory isn’t helping things

Homes for sale in the U.S. are down 20% from last year, according to Realtor.com, and have hit the lowest level since 2007.

Normally you’d think that was a good thing and the sign of a healthy market. But that is assuming inventory is low because people are buying. In this case, it’s low because A) sellers have given up trying to sell, and B) the foreclosure process is moving slowly as lenders continue to deal with the fallout of the “robo-signing” scandal.

For example, a Moody’s study found that Bank of America’s loan-servicing department takes an average of 552 days — more than a year and a half — to deal with loans that have become 90 days delinquent (e.g., by a short sale or by starting foreclosure proceedings). JPMorgan Chase also got poor marks from Moody’s, which isn’t surprising as both companies have a lot of ex-Countrywide and WaMu loans on their books.

The end result, as this Wall Street Journal story explains, is that would could be a buyer’s market (low interest rates and prices) is being hampered by a lack of inventory.

“On paper, all of the conditions are great for buying, but the reality doesn’t seem to match that,” said Ross Kutash, a 37-year-old attorney who has looked at more than three dozen homes in different suburbs of Los Angeles. “I wouldn’t describe it as a buyer’s market so much as no market at all.”

And the future, as always, is uncertain — millions of homes in some stage of foreclosure (the so-called “shadow inventory”) will eventually make it to market, but no one can be sure what that will mean.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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