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April 25th, 2012 11:25 AM by David W. Welch
The number of homes for sale in Orlando has been on a steady decline, and currently represents just a little over 3 months supply of homes available for sale. Why is the inventory so low, and where is the next "wave" of foreclosures and distressed properties? I have spoken with a few different local reporters, and these are the questions they ask me. I have tried to explain the answer is not a simple one. There are a number of factors that are effecting our market, and have an impact on the number of homes available for sale. Here is my what-if analysis of our situation, and the big issues effecting our inventory. The numbers are real, but I have ignored a few complicating issues. You can spot the complications in "( )."
First, there was a big sales boom that ran prices up from 2004 through the price peak in October 2006. Second, there was a bust that occurred when the market ran out of buyers running from 2006 through February of 2011. The combination of the big run up in prices and the corresponding decline which finally bottomed out last year left about 107,000 homes worth less than the price for which they sold. About 14,000 of those homes sold for cash, so the sellers should not be "upside down" on a mortgage, but they have an asset worth less than they paid for it. That leaves about 93,000 homes that may be worth less than the notes that are owed. (Obviously, some homeowners also took out equity lines, and cashed out with refinancing, but I don't have those numbers.)
Since January of 2007 we have closed nearly 63,000 distressed sales which leaves about 30,000 properties that may be "upside down", assuming these distress sales were "upside down" properties. (Another complicating factor is that a number of new homes have sold that may not be accounted for on our MLS, which is where I observed these sales numbers.) Keep in mind that not all of these represent distress situations. These are just the potential homes that may be worth less than the outstanding loans against them.
When I looked at foreclosure filings for Orange County and compared those properties against properties that had already sold, were currently under contract or available for sale; there were only 5,500 homes left unaccounted (shadow inventory.) Factoring in the other counties in our MSA, there may be as many as 10,000 homes that have the potential of being distressed sales. These may or may not be accounted for in the 30,000 that are "upside down."
The bottom line is that we have more homes going under contract each month than we are putting on the market. The number of listings expiring has actually gone down too, as appropriately priced properties are getting snatched up. The decline in inventory, and the strong sales numbers have given us nine months in a row of year over year price increases. As the prices continue to rise, there are fewer homes "upside down" in the market. At some point, the prices will rise enough to attract more sellers into the market, bringing the market back into equillibrium.
David Welch Real Estate Optimist, Orlando Real Estate, Search for Homes