In my last newsletter I discussed the sharp drop in available housing inventory and how it has been leading to an increase in the average sale price of residential properties. The chart below is of Pinellas County and reiterates this fact. Year over year the total number of sales has increased 16% while the current inventory of homes has decreased almost 42%. The result has been a modest increase in prices of 3.5%. As depicted in the chart below, the pace of declining inventory and increasing sale price has accelerated in the last six months. Since the low in February 2011 the average sale price in Pinellas County has increased 22%. Is this the sign that the housing market has recovered or is there something else at play?
It is pretty obvious that the decline in inventory has led directly to this increase, but what about the “Shadow Inventory” we hear so much about? If the lack of supply is driving prices up, could we expect an increase in inventory to level or perhaps decrease the average sale price? Reports over the last couple of months have suggested that there has been a slight decrease in the shadow inventory but that the “Robo Signing” scandal that arose around October 2010 has significantly reduced the number of homes that have been listed.
The chart above shows a sharp decrease around October 2010 in the number of homes that have received foreclosure notices but have still not been resolved. While the lack of filings since October is striking, it would appear that most of the homes that received notices at the beginning of 2010 are still in the foreclosure process. A recent report by RealtyTrac Inc. noted that the number of homes that received an initial default notice jumped 33 percent in August from July. This the largest monthly gain in four years and the increase represents a nine month high. If this jump in filings indicates that lenders are going to more aggressively work through the backlog, we can expect a surge in available inventory in the coming months.