Low Inventories Threaten Home Selling Season

Record low inventories last January set the stage for a selling season featuring soaring prices, bidding wars and the outbreak of price bubbles in several California markets. The improved conditions for sellers prompted many to list their homes, but not enough to measurable improve the inventory picture as real estate markets go into hibernation to prepare for the 2014 season. November listings were only 0.18 percent above levels of November 2012, when inventories in the Realtor.com database had already begun the dramatic decline that culminated in the spring, 2013 shortages. With inventory levels enter the winter at virtually the same level last year, should sellers remain leery of the market, inventories may not restock sufficiently to meet buyer demand next spring, setting the stage for a repeat of last year’s wild spring and summer conditions. Despite the remarkable price gains in 2013-exceeding 13 percent through the third quarter in the latest Case-Shiller numbers and the freeing of millions of owners from negative equity sellers seem to be pulling back. Recent consumer surveys have tracked a significant decline in consumer confidence in home price expectations. In addition, the share of those who expect mortgage rates to climb in the next 12 months remained at an elevated level since it spiked in June.