Months’ Supply Below Peak But Trending Up
The months of distressed supply since the start of 2009 have leveled off under the 20-month mark, but in recent months that trendline has begun to turn slightly upward, which is not an encouraging sign. Any further substantial increases in foreclosure activity at this point could result in a spike in the pipeline of distressed unit sales, and as a result drag down prices for all resale and new homes in the process.
Major Markets With Less than Six Months of Distressed Supply
Albuquerque, NM
Austin-Round Rock, TX
Boise City-Nampa, ID
Boston-Cambridge-Quincy, MA-NH
Cincinatti-Middleton, OH-KY-IN
Dallas-Ft. Worth-Arlington, TX
Indianapolis-Carmel,IN
New York-Northern New Jersey-Long Island, NY-NJ-PA
Provo-Orem, UT
Richmond, VA
For the past few years, the housing market has been hit hard by foreclosures, causing damage to home values and home buyer confidence. A foreclosure delivers a double whammy—it subtracts from demand, reducing the number of homeowning households, and it adds to supply. Getting foreclosed homes resold into the marketplace and back to a stable ownership situation is an important step toward recovery, but the sheer number of foreclosed homes that have been repossessed yet remain on the sidelines is a huge obstacle. This shadow inventory must ease before we start to see improvement.
Nationwide, foreclosure activity began to pick up steam in 2006 and rose unabated through late 2008. The number of foreclosures peaked in late 2010 and has since slowed, as a result of a procedural slowdown by the banks and some local market stabilization. Over 70 percent of foreclosed homes have been sold back into the marketplace, but a large number remain. Most markets still have a substantial foreclosure supply, but the healthiest markets have less than six months of distressed inventory. Not surprisingly, many of these markets also are seeing home prices stabilize as a result.
