Inventory drops — and the WSJ explains why

We told you the other day how home sales were up in March over a year ago (and have been posting such gains for nine months now), and NAR is reporting that inventory nationwide is down 21.8% from March 2011.

So what’s the deal? According to the Wall Street Journal, the reasons are threefold.

First, although prices are down closer to their historical norms, people remember 2005 — and don’t want to sell so far off the market peak (even if prices may not get back to those levels for decades). “That’s especially true for the roughly 15% of homeowners who are underwater on their mortgage.”

Second, now that banks have slowed the foreclosure process, the market isn’t seeing a flood of REOs.

Third, the investors who had flipped properties back in the early ’00s are now turning them into rentals instead, taking those homes off the market.

Says the Journal:

The first two reasons would imply that the downturn in listings is somewhat artificial and possibly temporary, and that inventories will pick up when prices begin to rise and when banks sort out their back-office operations. But the role of investors in today’s market could make the drop more lasting.

Click here to read the whole story.

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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