With interest rates remaining low and home prices inching up in many markets, you would think homes would be selling left and right. Unfortunately, the shortage of homes for sale has stifled any immediate possibility of a rapid recovery. So what’s the hold up? According to a recent article on Realtor.org, people aren’t leaving their homes, therefore causing more demand than supply.
According to the article, inventory of homes for sale has fallen 24 percent from a year ago. While a tight inventory can sometimes be beneficial to the housing market, it can actually work against recovery if the supply is drastically lower than the demand. In simplest terms, the market can’t recover if people aren’t buying homes and people can’t buy homes if there are no homes to buy.
It’s an unfortunate situation, especially since housing affordability is at a record high due to fallen home values and low mortgage rates. Despite the favorable financial conditions, mortgage applications for home purchases are down by 6 percent over the last year, according to data from the Mortgage Bankers Association.
Some analysts say the high number of homeowners who are underwater in their mortgages is a contributing factor. Many of these owners are taking a “sit and wait” approach, according to the article, hoping for their financial status to improve or applying for HARP and other refinancing assistance programs.
To read more, visit the original article here: http://realtormag.realtor.org/daily-news/2012/08/03/immobile-move-up-buyers-press-market