Market Update: Shadow Inventory Down, Buyers Interest Up
Posted 01-02-2012 at 12:42 PM by Sunshine Rules
If you’ve been searching for a home in the Sarasota - Bradenton area lately, you know firsthand that the inventory of homes has been shrinking in many price ranges and neighborhoods.
There are several factors contributing to the shrinking inventory.
The “shadow” inventory of homes is no longer growing and is, in fact, shrinking.
So what is shadow inventory? Shadow inventory typically refers to homes where the owners are at least 3 payments behind on their mortgage payments, homes where the lien holder has started the foreclosure process and homes that have been repossessed by the lien holder and are not yet on the market. Some include in this definition homes where the owners want to sell but are waiting for market conditions to improve. The term is derived from the idea that these homes are "lurking in the shadows" and waiting to go on the active real estate market.
According to CoreLogic, a company that tracks housing statistics, current residential shadow inventory is declining year to year as of their October 2011 report for SW Florida. In October 2010 there was a 7 month supply of shadow inventory. That number dropped to a 5 month supply as of October 2011. A one month supply is considered a healthy housing market.
Lenders are getting more savvy about dealing with homeowners who are falling behind in their mortgage payments. Federal programs are also now in place to help homeowners who have Fannie Mae or Freddie Mac loans, with guidelines on loan modifications and pre-foreclosure sales programs (short sales).
Buyer interest is up in the Sarasota - Bradenton area.
Another trend pointing toward shrinking inventory can be found in the latest report by a nationally known real estate website. They tracked home searches by potential buyers from July 1 to September 30 of 2011 and published a top 10 search list. All of the top 10 locations were in the Sun Belt with 5 of them in Florida.
The Sarasota - Bradenton - North Port area was the top location for searches by potential home buyers, with the Fort Myers area coming in fifth. Where people are property searching is an indicator of which local markets are picking up strength and where demand is growing. As demand goes up, inventory goes down.
Baby Boomers are starting to retire.
Baby Boomers, who put off their searches for locations for their vacation/ retirement properties when home prices in the Sun Belt states skyrocketed, are now looking again because prices have fallen to a point where they are attractive to Boomers.
Interest rates are at historically low levels.
The low interest rates, along with the lower home prices, have had a favorable impact on home sales in our area.
What does all of this mean for homebuyers in our area?
For one thing, fewer homes to select from. Instead of dozens of homes in a particular price range or select neighborhoods, you may find only a handful that meet your criteria.
Expect to see increased competition for well priced homes as they come on the market, and those homes staying on the market for fewer days before getting a contract. Multiple bids on aggressively priced homes is becoming more common, especially for bank owned (REO) homes.
So what can you do as a home buyer to improve your chances of getting your dream home?
Be prepared. If you are getting a mortgage, get pre-approved with a lender (vs. just pre-qualified) to show you are a serious candidate to purchase a home. If you are paying cash, have a proof of funds letter ready to go to back up the validity of your cash offer on a home.
Do your homework on neighborhood sales, ie comps. Look at the most recent sales that are comparable to the home you are interested in. Homes that are similar in size, age, location and features. (Not a one size fits all set of comps from one of the real estate web sites.) Know what the home you like should be selling for, then be realistic about your offer.
Move quickly. If a new listing comes on the market that appeals to you and is in your targeted neighborhood and price range, set up a showing appointment as quickly as possible. Remember the saying, he who snoozes, loses.
There are several factors contributing to the shrinking inventory.
The “shadow” inventory of homes is no longer growing and is, in fact, shrinking.
So what is shadow inventory? Shadow inventory typically refers to homes where the owners are at least 3 payments behind on their mortgage payments, homes where the lien holder has started the foreclosure process and homes that have been repossessed by the lien holder and are not yet on the market. Some include in this definition homes where the owners want to sell but are waiting for market conditions to improve. The term is derived from the idea that these homes are "lurking in the shadows" and waiting to go on the active real estate market.
According to CoreLogic, a company that tracks housing statistics, current residential shadow inventory is declining year to year as of their October 2011 report for SW Florida. In October 2010 there was a 7 month supply of shadow inventory. That number dropped to a 5 month supply as of October 2011. A one month supply is considered a healthy housing market.
Lenders are getting more savvy about dealing with homeowners who are falling behind in their mortgage payments. Federal programs are also now in place to help homeowners who have Fannie Mae or Freddie Mac loans, with guidelines on loan modifications and pre-foreclosure sales programs (short sales).
Buyer interest is up in the Sarasota - Bradenton area.
Another trend pointing toward shrinking inventory can be found in the latest report by a nationally known real estate website. They tracked home searches by potential buyers from July 1 to September 30 of 2011 and published a top 10 search list. All of the top 10 locations were in the Sun Belt with 5 of them in Florida.
The Sarasota - Bradenton - North Port area was the top location for searches by potential home buyers, with the Fort Myers area coming in fifth. Where people are property searching is an indicator of which local markets are picking up strength and where demand is growing. As demand goes up, inventory goes down.
Baby Boomers are starting to retire.
Baby Boomers, who put off their searches for locations for their vacation/ retirement properties when home prices in the Sun Belt states skyrocketed, are now looking again because prices have fallen to a point where they are attractive to Boomers.
Interest rates are at historically low levels.
The low interest rates, along with the lower home prices, have had a favorable impact on home sales in our area.
What does all of this mean for homebuyers in our area?
For one thing, fewer homes to select from. Instead of dozens of homes in a particular price range or select neighborhoods, you may find only a handful that meet your criteria.
Expect to see increased competition for well priced homes as they come on the market, and those homes staying on the market for fewer days before getting a contract. Multiple bids on aggressively priced homes is becoming more common, especially for bank owned (REO) homes.
So what can you do as a home buyer to improve your chances of getting your dream home?
Be prepared. If you are getting a mortgage, get pre-approved with a lender (vs. just pre-qualified) to show you are a serious candidate to purchase a home. If you are paying cash, have a proof of funds letter ready to go to back up the validity of your cash offer on a home.
Do your homework on neighborhood sales, ie comps. Look at the most recent sales that are comparable to the home you are interested in. Homes that are similar in size, age, location and features. (Not a one size fits all set of comps from one of the real estate web sites.) Know what the home you like should be selling for, then be realistic about your offer.
Move quickly. If a new listing comes on the market that appeals to you and is in your targeted neighborhood and price range, set up a showing appointment as quickly as possible. Remember the saying, he who snoozes, loses.
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