Real estate's new hidden market
Unable to sell, a growing number of homeowners are simply pulling homes from market.
Twice in the past two years, Matt and Christine Krol have put their Cave Creek, Ariz., house on the market. And twice, without any serious bids, they have removed the "For Sale" sign and rented out the house with its new granite countertops and inviting swimming pool.Skip to next paragraph
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"We never wanted to be landlords," says Ms. Krol from Puerto Rico, where she has moved. "We would still sell it if it went along with the lease and tenants, and the market improved."
Across the country, sellers discouraged by the prices offered for their homes, or tired of watching people traipse through their bedrooms, are yanking their homes off the market. While it's difficult to say how many houses this might be, housing experts believe the numbers are substantial. The implications of this "shadow inventory" are widespread: the housing market may be slow to come back, affecting everything from when Americans retire to whether they can afford to move to find a new job.
On Tuesday, there were few signs of firmer ground. The National Association of Realtors (NAR) reported March existing home sales declined 2 percent from February, a period when sales normally would start to rise. Median home prices fell for the seventh month in a row and are now 7.7 percent below a year ago. The inventory of unsold homes rose 1 percent over last month.
At the same time, foreclosures in March were up 57 percent over a year ago, according to RealtyTrac, an Irvine, Calif.-based company that tracks real estate sales. Foreclosures were 5 percent higher than February. According to the company, foreclosures now represent about 25 percent of all the houses for sale.
On April 9, the continued problems in the housing market prompted the Bush administration to announce an expansion of a Federal Housing Administration (FHA) program to help subprime lenders who are late with their payments. The FHA expects 500,000 families will use the program to refinance into prime-rate, FHA-insured mortgages by the end of the year.
However, critics of the Bush administration called it too little too late, since some 2 million additional homeowners are facing foreclosure.
According to the Census Bureau, in the fourth quarter of last year, there were 2.2 million vacant homes for sale. In a normal market, there should be about 1.2 million for sale. "Those numbers will rise in the first quarter [of 2008], particularly with the surge in foreclosures," says Mr. Zandi.