In the sale of any kind of
commodity one of the keystones of market analysis is the concept of supply and
demand. In a balanced market there is an inventory of the product that is
in line with the demand for that product. In real estate we have been in a buyers market over the last
several years because the existing inventory of property (i.e. sellers) in La
Plata county has far exceeded the demand (i.e. buyers). We are beginning
to see a more balanced inventory as shown in recent statistics showing that
inventory and days on market are going down and transactions are going
up. If you would like to review recent Residential
Market Statistics for La Plata County that delineate these trends please contact me and I will send you a copy.
One of the things we want all of
our Sellers to continue to have front of mind is the concept of the shadow
inventory of distressed properties (foreclosed properties or short sale
properties) that most probably will be coming on the market later this
year. Just within the last 60 days a road map was published by the federal
government that will cause/allow the banking industry to start releasing their
foreclosed properties into the marketplace. According to an article
published this week at dsnews.com it will take 46 months to clear the market
supply of distressed homes nationally according to estimates from Standard and
Poor's Rating Services based on first quarter 2012 data. There have been
at least 3 other major news articles in the last 30 days about this issue,
including Reuters on April 4, 2012 that indicated that Americans are bracing
for the next foreclosure wave and CNN Money just a couple of days later with
their own story about the flood of foreclosures expected to hit the
housing market in 2012. And then ABC News on their blog on April 26, 2012
put it right to the pricing situation in their article: “More foreclosures drag
on home prices.” I'm putting the cites for these articles below if you
are interested.
Although we don't know how many
more distressed properties will be coming on the market in La Plata county this
year there is no doubt that there will be some. The below chart will give
you a visual as to why we think this could have a fairly significant impact on
supply and demand. We are not suggesting that this wave of possible
foreclosures and short sales will really "sock" our market again and
put tremendous downward pressure on prices, but we do think that it will be a
factor causing pricing not to increase over the foreseeable future.
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