When the Bottom Arrives, A Flood of “Shadow Inventory”?
By: Stan Humphries, Chief Economist | May 19, 2009
Just as news of increasing home sales are hitting our ears and possible early signs of a bottom are evident in a few hard-hit markets, a contingent of American homeowners seems to be poised to add their own homes to the already-high level of inventory in the market - a move that could stall any recovery in home values.
Almost one-third of homeowners (31 percent) said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market, according to Zillow’s first quarter Homeowner Confidence Survey. Maybe these homeowners have outgrown their homes, or are dreaming about living in a new neighborhood or town, but don’t like the prospect of selling in the current market.
The chart below shows the breakdown of responses (they don’t total 100% because of rounding).
This “shadow inventory” will likely be one of the contributors to a recovery that is more “L”-shaped than “V”-shaped. As sales rise and inventory is cleared off, many homeowners will start to test the waters again by putting their homes on the market, thus keeping supply levels higher than they would be without this pent-up inventory. These sustained supply levels will serve to keep downward pressure on prices, which can only increase as demand begins to outstrip supply. We here at Zillow expect to see a long, drawn-out bottom, with any upward bumps in value tempered by new inventory coming into the market. Even if those who are “somewhat likely” to sell decide to hold onto their homes, substantial amounts of new inventory will be added if large numbers of those indicating their are “likely” or “very likely” to sell end up putting their homes on the market.
It’s important to note that a lot of these home sellers will also be buyers, so they will help some of the inventory cycle through. But it’s probable that some will decide to rent after being battered by declining home prices, or because they are baby boomers looking to downsize, so it’s likely that this “shadow inventory” represents more supply than it does demand.
Among those homeowners who said they were at least somewhat likely to sell their homes in the next 12 months, when asked what they would consider to be signs of a real estate market turnaround, the results were as follows:
Homeowners are optimistic about the future, we found out from the survey, so it’ll be interesting to see when and how this plays out.
- Stumble it!
- Categories: Real Estate Analytics
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NoteMod.org » Blog Archive » As Would-Be Home Sellers Hold Back, Shadow Market Looms on May 20, 2009 10:07 am
[...] on prices, which can only increase as demand begins to outstrip supply,” Humphries notes in a blog posting. “We here at Zillow expect to see a long, drawn-out bottom, with any upward bumps in value [...]
More Threats of Shadow Inventory: Fears of a vast "shadow" horde… on May 20, 2009 2:01 pm
[...] Fears of a vast “shadow” horde of real estate have been aired before, and this week̵… If and when the housing bottom arrives and we begin to see the light of day again, will properties that have been held off the market until such time suddenly flood our charts, thus tamping down prices again? Perhaps, says Zillow, who found in a survey that almost a third of homeowners would be at least “somewhat likely” to put their homes on the market if they saw “signs” of a recovering market. Rut roh! [Zillow, previously] Posted in Curbed SF [...]
More Threats of Shadow Inventory: Fears of a vast "shadow" horde… on May 20, 2009 2:02 pm
[...] Fears of a vast “shadow” horde of real estate have been aired before, and this week̵… If and when the housing bottom arrives and we begin to see the light of day again, will properties that have been held off the market until such time suddenly flood our charts, thus tamping down prices again? Perhaps, says Zillow, who found in a survey that almost a third of homeowners would be at least “somewhat likely” to put their homes on the market if they saw “signs” of a recovering market. Rut roh! [Zillow, previously] Posted in Curbed [...]
As Would-Be Home Sellers Hold Back, Shadow Market Looms « Todd Murphy’s Law on May 21, 2009 8:43 am
[...] on prices, which can only increase as demand begins to outstrip supply,” Humphries notes in a blog posting. “We here at Zillow expect to see a long, drawn-out bottom, with any upward bumps in value [...]
DebtFree on May 21, 2009 12:17 pm
RE: “baby boomers looking to downsize”
In addition to boatloads of shadow housing inventory coming on the market, the demographic shift in America’s population is worth noting at length.
The Birth Rate in the United States has been declining for years. Generation X/Y-ers can’t afford $600,000 capes (which have traditionally been “starter homes”; $600,000 starter homes?).
The “wealthy” baby boomers in their peak earning years are not going to buy all these homes.
And high paying “white collar” and mid-level “blue collar” jobs are going overseas.
Short of the “funny money” mortgages used to fuel the real estate bubble (the ramifications of which have nearly destroyed our economy), there is nothing to support the still-bloated home prices.
Look for a further 30-40% decline in home sale prices over the next 24 months. This market will “over correct” BELOW price levels before the bubble started, because many of the economic fundamentals in place before the bubble (high paying jobs, manufacturing jobs, mid-life boomers looking for a trophy home) are gone for the foreseeable future.
Web Real Estate Tools is honored to be the Hosting of the Carnival of Real Estate — Web Real Estate Marketing on May 26, 2009 11:42 am
[...] Stan Humphries presents When the Bottom Arrives, A Flood of “Shadow Inventory”? posted at Zillow [...]
Vola on May 28, 2009 11:26 am
OK since you are talking about news of increased home prices and such why can’t you guys/gals get the Southwest market of Florida correct—probably because you really do not know anything about it. Alright so why do you have another 30 day change of minus 12K in certain areas of Sarasota Florida when there was actually an increase see the news online today May 28 in the Sarasota Herald from the Realtors and other such “experts” that states:
“Homes prices in Sarasota-Bradenton rebounded 9.5 percent from March to April, pushing the market’s median sales price up about $20,000 from a possible bottom earlier this year.”
So now can you get it right!
My Naperville Homes Blog » Naperville Market Stats – August continues upward on September 5, 2009 8:12 am
[...] want zip code specific breakdowns they are also available. Of recent interest is the talk of “shadow inventory” in the foreclosure market and the impact that may have on local markets. Look for a post on that [...]