Housing Shortage to Last Another Year

The housing market is currently trapped in an “inventory spiral” that is unlikely to snap for at least another year, according to real estate experts.

Housing prices found a floor in February 2012 and have been on the rise as strong investor demand and a decline in foreclosure sales has helped shrink years of excess supply.

Housing inventory nationwide declined 23 percent year-on-year in February, according to the Department of Numbers’ Housing Tracker. Inventory fell year-on-year in all 50 of the largest metros and was down more than 50 percent in several California metros.

The steep decline in supply has resulted in price increases of 10 percent or more in metros such as Sacramento, San Jose and Seattle.

More recently, the pace of inventory decline has shown signs of slowing down. Still, there is a shortage of inventory in the housing market. At the current sales pace, it would take only a little more than four months to clear the entire inventory in the housing market.

What this means is that it is a good time to put your house on the market. If you have been waiting for prices to go up and putting off needed repairs, now is the time to get them done. Homeowners should take care of anything from minor projects to damage restoration and get their house on the market.

This shortage bodes well for home prices, but it is not good news for buyers who are slowly returning to the housing market only to discover they have few good choices.

It appears this shortage might persist for a while.