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Home : Blogs : Joe Manausa - Tallahassee Real Estate : Tallahassee Real Estate

Are You Measuring The Forgotten Real Estate Inventory?

Every market is joyfully reporting a reduction in the number of homes for sale in the Realtor MLS system, but I have not seen anybody addressing the forgotten real estate inventory.

I am concerned that we are experiencing a different phenomenon all together.

I suspect everybody has a decent understanding of supply and demand in real estate, and that we use routine measurements of both demand and supply to determine the health of the housing market.

For most US housing markets, the supply of homes is measured purely based upon the number of homes listed in the local Realtor MLS system.

Would you be surprised/shocked to discovery that the homes listed for sale in the MLS only represents about 20% of the real inventory of homes that need to be sold?

Long time readers of the Tallahassee Real Estate Blog know that an additional "Shadow Inventory Of Homes" exists, which is comprised of all those unlisted bank holdings and currently unlisted delinquent home owners.

But what about that large group of homes (even larger than those currently listed for sale in the Tallahassee MLS) that tried to sell in recent years and failed?

Measuring The Forgotten Real Estate Inventory

You might never have thought about it, but there have been a lot of homes that failed to sell during the housing correction, and those that remain unlisted and unsold are a group that I call the Forgotten Real Estate Inventory.

It is the growing group of homeowners who have given up hope of selling their home, but they still want to move.

Many of the homes that failed to sell simply re-entered the MLS after failing (sometimes more than once) and eventually sold, but you might be surprised at the number of failures that still remain in the forgotten real estate inventory.

Forgotten Real Estate Inventory Still Growing

This is not a problem that is going away in the next year or so.

The first graph shows that there are more than 2 years of supply in the current count of the forgotten real estate inventory, and it is growing.

The real estate graph above shows that the Forgotten Real Estate Inventory is growing by more than 3 homes per day (Roughly 1,150 per year), which is about 6 months of supply.

When you put the forgotten real estate inventory together with the shadow inventory and the Realtor MLS inventory, there is five years of supply of homes for sale in Tallahassee.

I suspect most other markets would find similar numbers if anybody there was really measuring.

So I am excited to see the MLS supply of homes falling, but I am going to withhold my celebration until I see how the shadow inventory and the forgotten real estate inventory work themselves out.

Joe Manausa, MBA
Century 21 Manausa & Associates
www.manausa.com

Posted by Joe Manausa - Tallahassee Real Estate on 05/04/2012 07:33 AM

Comments (64)

Real Estate Supply and Demand in the Real Estate Market Channel

real estate tallahassee, real estate inventory, real estate supply and demand

Originally posted at: Tallahassee Real Estate: Are You Measuring The Forgotten Real Estate Inventory?

Short URL: http://actvra.in/zH4

This post has been included in Florida Real Estate News Leon County, FL Real Estate News Tallahassee, FL Real Estate News
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64 Comments on Are You Measuring The Forgotten Real Estate Inventory?

20 Most Recent Comments Displayed Show All

« 1 2 3 4 »

MAY

2012

A lot of people in our area that failed to sell were not really trying to complete with distressed properties and therefore were priced above the market.

We see a pent up demand as well as a pent up inventory and feel the two will result in "a great time to be a Realtor (broker)".

I am looking forward to the day we need to start building again to satisfy demand as this is when the cost to build will bring prices back to reality.

Our distressed property levels were mostly created through spec building. Speculation without thought to absorption.

Good post. Often times there is a lot more than meets the eye.

Harley wrote "

I am looking forward to the day we need to start building again to satisfy demand as this is when the cost to build will bring prices back to reality."

Amen x 10.

Cost has been beaten out of the market due to the excess inventory, but I agree with you, when growth requires more homes, we will see a price explosion that will be through the roof.

Excellent post, yet it depends on the market area, doesn't it? Some pockets are still filled with distressed inventory, however, until the shadow inventory appears, whose to know if other pockets will emerge?

Good advice and interesting stats, Joe. I'm excited by the fact that the So Cal inventory is not increasing, and is actually decreasing by quite a bit, in many areas. Also, it does appear that banks are more serious about working with homeowners, to try and find a mutually beneficial solution. However, I do agree with you, and believe that we need to be cautiously optimistic. If, in fact, the "shadow inventory" does hit the market, it could undermine all efforts.

Great post & I hope you're having a fantastic weekend!

Gina

Valid points and you seem to be very well versed in your market area. Education, and knowledge of the local markets we work in is paramount to best representing your clients. Nice comment string as well - thanks for posting.

MAY

2012

Joe -

Awesome post. I am learning about shadow inventory. I have been watching a foreclosed property for a client. It is taing FOREVER to get it active. The agent has been assigned and he tells me how frustrated he is waiting on the bank...meanwhile I have a buyer who wants it...cash. Hmm...

Hi Joe, I think the banks are taking a measured approach to releasing the shadow inventory. Another view: http://blogs.wsj.com/developments/2012/05/03/that-new-foreclosure-tsunami-still-waiting/

Joe: As usual, very good thoughts. I have also wondered where 'all the houses have gone' when suddenly last year we had a dramatic drop in inventory & have continued to decline since that time. They went 'somewhere' that's for sure but I'm not sure how to document it. Some have rented, others just gave up & stayed, others are foreclosures in some sort of abandoned state. It's a totally odd occurance in the market. We currently have such low inventory that it should be a sellers market but obviously it's not.

Hi Joe, I really enjoyed the post about "The Forgotten Inventory". Yes, unlike some others, I realize your post was NOT about "The Shadow Inventory". Not sure I have time to track all of that in my MLS area but I like the idea of tracking just one or two specific cities from our MLS here in the Kansas City area. I for one have struggled with listing inventory that did not sell due to the seller being un willing to sell at current market values. Many of them, as you said, did become unwilling landlords and others opted to wait for the market values to improve and will eventually re-list and sell. As you stated, they want to move, but can't. A few went ahead and sold at the discounted prices and some tried a short sale.

I believe, as Bill Travis stated above, that the families who went through foreclosure will eventually be back in the market. They were forced to become renters yet prefer homeownership. I look for the the folks who lost homes in 2008 to start re-entering the market in late 2013 to early 2014 if they were able to gain employment and worked on the credit scores. If they are smart, they will hire a credit repair company to help them out as needed. Hopefully, when "The Forgotten Inventory" starts hitting the market again, the forced renters will be ready, willing and able to buy that inventory.

Congratulations on the post!

Dear Joe,

Maybe an opportunity, like Mary Elizabeth mentioned. Possibly, some of the home owners, who were forced to turn into landlords will be ready to take what they can get and move one.

I'm a little confused and apparently missing something. I was under the impression that Florida was experiencing a RE explosion with Europe, Brazil, Argentina RE invetors swarming Fl RE.

I think that these homes will slowly be feed into the market so as not to cause a major price drop. But it will make recovery slower.

Non relisted homes, may not come back into inventory... They have decided to remodel, stay put, refinance, rent, or any of other decisions that may have developed. It could be 3 yrs, 5 yrs 10 yrs, before they are "back in inventory"

That a home didnt sell, was withdrawn, expired and not re-listed, does not mean its coming back. imo

IN WASHINGTON state, the "shadow" inventory of short sales, delinquents is represented in a recent report at 5 months, one of the lowest in the nation.

REAL ESTATE IS LOCAL (very local), as local as neighborhood to neighborhood. Lets hope and participate any way we can, towards a general economic recovery. Buy local, buy usa, and lets "keep the lights on"

Forgotten inventory ... LOVE IT ... I've been writing about shadow inventory for a while, and while I have mentioned 'forgotten inventory' I have yet to investigate it as detailed as you have ...

with that said, I have run something very similar to the 'forgotten inventory', it's property that is 60% higher than market value.... which in the dade/broward are runs about 7 months at the 3 month agerage closing rates, also if you look at listings that are on the market for over 18 months, you'll most likely note that they make up a sizable percentage ( greater than 12.5% ) ...

But that's all numbers, and you need validation of facts: so I took my broward database and mixed it with the expired of the last 3 years that are not re-listed... quick study on the pie chart stated the following: 17% went into banks hands ( now that's shadow inventory ) 21% have lispens against them ( again more future shadow inventory ) so we are up to 38% in shadow, and another 62% waiting ....

here is where it get's interesting: with this data, I dialed a friend of mine whom we work together on data crunching ... when he saw the report, he started to laugh, do you know why? it's really simple, the other 62% ( which will correlate to the 'forgotten inventory' are the wishful thinkers ... a good example is the following: do you know of someone that bought a stock at $ 100 and it went down? I bet you heard them say ' when it hit's 100 I will sell it, that's what we will be coming up against for the next few years ... tons of wishful thinkers

I think I will write a full dissertation about this, and have it published via the media channels that I know. could scare the crap out the industry LOL

Michael

Joe,

Your fascinating post inspired me to dig a little deeper into the data. The result was "Don't Forget the Forgotten Inventory"

on Real Estate Economy Watch and UPI.

http://www.realestateeconomywatch.com/wp-admin/post.php?action=edit&post=4918&_wp_original_http_referer=http%3A%2F%2Fwww.realestateeconomywatch.com%2Fwp-admin%2Fedit.php&message=1

Yours,

Steve Cook

MAY

2012

Great post Joe, I have seen a great supply of these sitting around waiting for the market to improve or waiting for the bank to get on with the foreclosure, all leading Real estate professionals and builders into a false sense of euphoria when they read about current low inventory.

One of the real dangers is that we are now seeing a surge in building around here which will eventually exasperate the situation with even more supply.

You've identified my biggest concern Bob, which is builders falsely reading the falling supply. You cannot believe real inventory is being reduced with unit sales are at such a historical low level.... Thanks for adding to the discussion with a great point.

In our market we have a smoking hot rental market and have for a while. no doubt because of alot of displaced homeowners but also people making the decision to rent. This hidden inventory, at least in our neck of the woods is more likely hapily rented inventory. Good perspective though and I do think that over time those homes will work their way back into the market, probably just not all at once.

Damon

MAY

2012

I agree. There is much pent up demand, for Buyers and Sellers, because of this market.

FEB

Most articles I have read seem to indicate that the shadow inventory is also falling steadily, and that the bank's strategy of listing them on the market slowly to not flood the market actually worked, and they will continue to do so to keep prices stable. As far as those who want to sell, but couldn't, I'm sure that they are hearing the same news about home prices increasing and inventories dropping, and have been re-listing over time. I had someone pull their listing last year, and they are re-listing next month...and I'm sure I'm not the only one. Obviously they won't all make that decision at once, so I'm sure inventories will remain relatively stable.

I'm much more of a realist than I am an optimist, but I think your analysis might be a tad more dire than the actual state of affairs. Now government debt and excessive regulations...that's a conversation worth having that could undoubtedly derail the economy, and has certainly caused this recent slowdown in economic growth (2% GDP range). I think it's a much scarier reality than forgotton housing inventory.

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Joe Manausa - Tallahassee Real Estate

Tallahassee, FL

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Century 21 Manausa and Associates

Address: 1140 Capital Circle SE #12A, Tallahassee, FL, 32301

Office Phone: (850) 386-2001

Cell Phone: (850) 508-1544

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