Existing home inventory is low because…
- Many homeowners remain underwater: CoreLogic estimated 5.1 million owners ‘underwater’ as of Sept. 2014
- Expiration of Mortgage Debt Forgiveness Act at end of 2013 reduced short-sale supply
- Foreclosure-to-REO flows have declined, thus REO sales down
- Many homeowners have no debt or low-rate debt…About one-third of homes owned ‘free and clear’ of debt
- BEA estimated average interest rate on debt outstanding is 3.9%.
New home inventory is low because…
- Home builders are concerned about future demand, tight credit
- Existing ‘trade-up’ movers may stay put
- Household formations have been exceptionally low
- Acquisition-Development-Construction credit relatively ‘tight’
- Lessened inventory helps to sustain price increases.
Source: FreddieMac What to Expect in the 2015 Housing Market Report