A new report from CoreLogic suggests that the poor quality of available inventory may be contributing to sluggish spring sales.
Of the 2 million existing homes currently for sale many "suffer from housing obsolescence-properties that are no longer desirable because their characteristics do not match what buyers are looking for in a home," Mark Fleming, a CoreLogic analyst, wrote in the report.
Fleming pointed to a substantial rise in the ratio of days on market to for sold homes verses those in active inventory across the country as evidence that much of the available inventory simply doesn’t appeal to today’s buyers. The higher the ratio, the higher the proportion of undesirable homes which sit on the market for a long time before finding a buyer.
Prior to the housing crash, in 2007, the number of days on market for sold homes and homes in the active inventory was nearly 1:1; now the average home that sells spends only two-thirds of the time on market as the average home in the active inventory, suggesting that desirable properties are being snapped up quickly while much of what’s on offer languishes.
"Maybe the reason that home sales aren’t increasing is because buyers can’t find anything they want to buy. More viable homes for sale are needed to draw this demand out of the shadows," Fleming wrote.
At the same time, other market forces are conspiring to keep many sellers off the market, Fleming posited. A large percentage of current homeowners are enjoying mortgage rates lower than the current market rate. Even if they have equity in their home, if they were to sell, they may not be able to buy a substantially larger or better-located home, since today’s higher rates would make their monthly payment significantly higher.
"About half of all mortgaged homes have below-market-rate mortgages…there are an estimated 3.57 million likely sellers who may be discouraged from listing their home for sale because the cost of financing the next home they own will be higher," Fleming wrote, saying that this group may be a substantial contributor to the shadow inventory problem.
