Real Estate Investing

Housing inventory in 29 metro areas across the United States showed an approximate 2.5% increase at the end of March, versus one month prior. At least 18 metro areas showed a 12% YTD increase, the Wall Street Journal reports. As bad as this sounds, it may not be the whole picture. There is a “hidden real estate market,” a whole sea of homes with owners ready — but unable — to sell. So, they have given up and retained ownership of the property or entered the landlording business.

The Christian Science Monitor reports:

“While it’s difficult to say how many houses this might be, housing experts believe the numbers are substantial. The implications of this “shadow inventory” are widespread: the housing market may be slow to come back, affecting everything from when Americans retire to whether they can afford to move to find a new job.”

With the current housing inventory known to exist, it would take 9.9 months at current sales rates to sell it all. That’s just slightly below the 10-month inventory of the early 1990’s. Lowering the price is one of the most common sense tactics for unloading an unwanted home. It is also, however, one of the biggest obstacles sellers face. It is very, very difficult — emotionally, mentally, and often financially — for sellers to voluntarily lower their asking price. And in many cases lately, lowering the asking price doesn’t even help the house sell. Some experts speculate that buyers are waiting out the market, holding out for home prices to fall even further. It’s going to be a long year, indeed.

Fort Worth-based D.R. Horton Inc., one of America’s largest homebuilders, has had a hard year. Revenues dropped from $2.8 billion to $1.71 billion, home closings fell 36% and cancellation rates stayed at 44%. And they are not alone. Builders across America are running into similar hard times.

According to the Commerce Department, housing starts in January were at their lowest level in 17 years. Just over 1 million new homes were started in January, up 0.8% from one month prior, but down 28% from one year prior. Builders have offered all sorts of incentives to pique buyers’ interest, including discounts deep enough to anger surrounding homeowners who paid full price only to see their home value drop like a rock.

D.R. Horton is no different, except maybe in marketing tactics. The company’s recent “unauction” offered “auction-level pricing without all the hassle.” The tactic, also commonly referred to as a “firesale,” offered discounts of up to 50%, more than $300,000 in many cases. These are in about two dozen developments in southern California, a notoriously pricey real estate market. Well, obviously, response was overwhelming, with a line of buyers camped out in sleeping bags in the cold. According to the Outstanding Investment blog, this is the first of many such sales as builders look to cut their losses and boost their capital. What a boon for first-time homebuyers!

There have been some debates as to whether the U.S. housing market is truly as bad as proclaimed, or whether it is largely perpetuated by the media. From reading local news reports, it does appear that the national picture of doom and gloom may be a tad overblown. Here are a few stories from the local fronts:

1. Glenwood Springs, Colorado

2. Charlotte, NC

3. Jefferson County/Mt. Vernon, Illinois

4. Albany, NY

5. Boston, Mass.

6. Clarksville, Tenn.

7. Syracuse, NY

8. Seattle, Wash.

9. Austin, Texas

10. Bismarck, ND

11. Salt Lake City, Utah

12. San Juan County, NM

And this little gem, Real Estate Not Deflating in Entire U.S. See? It’s not all doom and gloom! But if you live in one of the areas of the U.S. that are suffering (and they’re certainly out there), stay tuned to learn some innovative selling techniques.