2011 a Down Year for Inventories

by Houston Agent

Housing inventories were down 22.3 percent in 2011, but is that a good thing for housing?

Housing inventories finished 2011 down by 22.3 percent, with 1.89 million homes on the market at the end of December, the lowest inventory in the last four years.

Though low inventories would appear to be a good sign for housing – after all, oversupply has plagued construction since 2006 – a new Wall Street Journal piece on the data reports the jury remains out on what the inventory data truly means for real estate on the whole.

Reporting for the Journal, Nick Timiraos writes that there are two main lines of thought on what the inventory declines signify.

“Low inventories are an important ingredient for any housing recovery because prices could firm up in markets that have worked through their inventory,” Timiraos writes. “Still, some real-estate agents aren’t celebrating because there’s a large backlog of potential foreclosures that haven’t yet been taken back and listed by banks.”

Also, low inventories could impact the quality of the homes on the market. As we reported back in October, many sellers of preeminent homes are pulling their properties off the market until prices recover. As a result, some homebuyers have reported an increasingly weak supply of desirable properties on the market, which pushes sales down in already-hard-hit areas.

And of course, the low inventories could be a mirage. Foreclosure filings have been tied up in processing issues since 2010’s robo signing scandals, and if the closing months of 2011 are any indication, foreclosures could increase markedly in the coming months.

Of the 145 markets tracked by Realtor.com and cited by Timiraos, only one, Springfield, Ill., posted a year-over-year inventory gain for 2011. The biggest declines came courtesy of Miami, at 49.7 percent, Phoenix, at 49.1 percent, and Bakersfield, Calif. at 46.6 percent.

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