There are a few things happening in the market that I see.

1. Banks (REO's) don't see that it's a sellers market and they are unnecessarily dropping prices in part due to low price opinions.

2. There are a lot of sellers unable or unwilling to compete that add to the inventory and make is seem worse then it is. 

Though this is part of the shadow inventory which will creep out when the market improves.  We'll cover the shadow inventory in a separate post because it will have a noticeable impact on sales as the market improves.

(ARMLS Data via The Cromford Report, Graphed by Artur Ciesielski)

There is only a 2.6 month supply of the homes which makes up 68% of the sales market.  Most consider 5-7 months to be a balanced market in terms of supply and demand and we have 2.6 months.  If this is not a clear signal to sellers, in this case institutional property holders, that they need to slow down the price decreases then it's difficult to think of another. 

Coupled with multiple offers on properties and increasing sales, we're rocking through inventory at an amazing pace.  If these sellers were not lenders then we'd be seeing price hikes by the week.

The other opportunity is for buyers.  The market is clearly over compensating and this realization has not sunk in yet, except for those in the market now. 

With such a low supply of well priced homes it's a matter of a short time before there is a realization that prices should have hit the bottom and maybe they have in the REO market even though the median price has decreased over the last few months. 

Look at active price per square foot at $77.24 then look at sold price of $80.82 per square foot. Prices are being pushed up because the demand for homes has increased. 

This is clear when we see that 4,542 homes sold in the last 30 days that were lender owned and made up close to 70% of all sold homes.  In addition the discount from list price to sales price is less then 5% unlike the market as a while which is near 9%.

The total inventory out there is not reflective of real motivation.  There are a lot of sellers who are not motivated for this market or are unable to be motivated: under water. 

The real inventory is much lower, but that is always the fact, in any market, but in this one it's more pronounced, especially since many normal sellers don't have a chance against lender owned (REO) properties.  

I don't want to say it's a good market to buy because we don't know what will happen in the next months or years but at these prices it does not matter too much.  They are in many cases below replacement cost.  This means it would cost you more the built the home then just to buy resale home. 

Many homes have such low mortgage payments that they are equivalent to a luxury car payment and investors can cash flow from year one which is an amazing feat that has not been attainable in many years: cash flow with a normal 25% down-payment.

The numbers all point to an improving market, a rapidly improving market in which prices may soon increase as demand stays strong and it should, with all the loan programs out there and incentives from the government.

Ready to buy?  Joanna 602.358.1392