Economists Pinpoint Inventory Shortage Causes
June 30, 2015
Inventories of homes for-sale remain low due to home owners staying put and homebuilders still keeping supplies tight, economists said during a panel discussion at the National Association of Real Estate Editors' annual conference.
Read more: Why Inventory Problems Aren't Going Away
Homes listed for resale in May were at a 5.1-month supply at the current sales pace. Most economists consider a supply of six to seven months supply to be balanced and healthy for the market.
Economists at the National Association of Real Estate Editors' annual conference pointed to several factors that are preventing sellers from putting their homes up for sale. Lawrence Yun, chief economist of the National Association of REALTORS®, blamed the bulk of the inventory shortage on the lack of new construction.
"We will still have an inventory shortage if builders won't build," Yun said. "It is just simple math."
Other economists during the panel also said the persistent lack of equity four years into the housing recovery for a large number of home owners continues to prevent many would-be sellers. About 5 million homes in the U.S. -- or 10 percent -- are underwater, valued at less than the mortgage.
Also, some home owners may be reluctant to sell partly because they refinanced in recent years at interest rates of less than 4 percent and they don't want to give up those low rates, says Frank Nothaft, CoreLogic's chief economist.
The economists also noted a significant increase in single-family homes being offered for rent that have dented the overall supply of homes for-sale too. Nothaft estimates that since the downturn investors have purchased 3 million single-family homes and converted them into rentals.
Other economists at the session also noted that stringent mortgage standards, prohibitive land costs, and limited lending to small builders was also prompting a lower supply of homes for sale.
Source: "Economists Assign Blame for Housing Shortage," The Wall Street Journal (June 26, 2015)
Updated: June 04, 2020