‘Shadow’ Overhyped as Housing Threat
It’s been a hard year to be a housing bear.
U.S. housing markets finally came alive in 2012, with home sales and housing starts up strongly. And prices are on track to end the year in positive territory for the first time since the downturn began in 2006.
S&P/Case-Shiller home-price data due Wednesday should confirm those gains. The main 20-city, composite index for October is expected to rise by 4.1% from one year ago, according to Zillow Inc. Z +0.59
Skeptics often point to the sizable overhang of properties headed toward foreclosure—the “shadow” inventory—that they say will erode such recent gains. While shadow inventory remains high, there is good reason to think it won’t choke off the nascent recovery in 2013
First, the shadow is shrinking. It has already fallen to 3.4 million units this year from a peak of 4.7 million in 2009, according to John Burns Real Estate Consulting. As well, inventories of new homes for sale are at 50-year lows, while listings of previously owned homes are at an 11-year low. Banks have also become better at approving short sales, where homes sell for less than the mortgage owed.
The danger in focusing so heavily on supply is that skeptics have overlooked demand, which revved up this past year. Sales of existing homes in November were up 14.5% year over year to a three-year high.
They still just don’t get it.
What a shame…