Housing inventory glut gets fatter
More homes are on the market with more discounts for buyers.
NEW YORK (CNNMoney.com) -- The number of homes for sale around the nation jumped over the past year, according to figures from ZipRealty, a California-based real estate broker.
Zip monitors 18 metro-area markets from all four regions of the country. For the 12 months ended July 31, only Boston and San Diego showed drops. Boston's inventory fell 5.8 percent and San Diego's dropped 2.1 percent. The average for the 18 cities was a 19 percent increase in homes on the market, a total of 810,566.
In contrast, Seattle inventory has exploded, up 56 percent to 32,647 in the past 12 months. Other big increases were recorded in Miami (34 percent to 77,055), Orlando (34 percent to 34,900), Las Vegas (33 percent to 28,905), Baltimore (31 percent to 9,601) and Chicago (26 percent to 82,622).
In Los Angeles, inventory has soared since Zip started tracking it two years ago. The number of homes on the market has risen from about 30,000 to more than 106,000, but the population of the area it covers, which is nearly 13 million people, should be taken into consideration.
Tampa has one-fifth the population of Los Angeles but almost half the inventory at about 57,000. Per capita, that's about two-and-a-half times as many homes for sale.
The high inventory numbers may even be an undercount. In slow times, more sellers remove their properties from the market for several months, perhaps spruce it up a bit, and re-list, often at a lower price. In the meantime, the home doesn't count toward the inventory totals.
Much of the inventory in many young Sun Belt cities is in new housing. Developers overbuilt during the boom and, when the slump hit, they were left with large numbers of empty houses built on spec, and many were left vacant by cancellations. In some places, whole streets or subdivisions were unsold, their interiors were not even completed.
The wait for tenants may be a long one. It's much harder to get a loan these days for all but the best borrowers.
Borrowers, for the most part, now must put more money down, document their income and assets, have few dings against their credit worthiness and show that they can afford the payments.
Those tightened lending restrictions eliminate potential buyers from the market, reducing demand even as more supply hits the listings due to big jumps in foreclosures and builders finishing up projects initiated before the slump took hold.
With stocks foundering lately and economists pushing back their expectations for a housing recovery, short-term prospects for any reduction of inventory is poor.
Even the National Association of Realtors (NAR), which is not noted for its pessimism, isn't predicting any improvement in home sales for many months.
In a press release Wednesday, NAR's senior economist, Lawrence Yun, said, "Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year with broader improvement to include the new-home market by the middle of 2008."
Before that happens, motivated sellers may have to slash prices to move properties. Already, in Sacramento, 48 percent of sellers have discounted from their original listing price. Some 47 percent of Orange County, California, sellers have dropped their price and more than 45 percent of sellers in both Boston and Phoenix have done the same.