North Conway NH supply and demand and how shadow inventory affects real estate for sale

By
Real Estate Agent with Badger Realty 057032NH/BA911983ME

Supply and demand is a relatively simple concept. It applies to Ossipee NH watefront as well as mountain views in North Conway NH. Like any other industry driven by supply and demand, we need to look ahead to see where the supply is trending. As an example, let's assume I own a hardware store in town. I have done $1 million in retail sales each and every year for the last ten years. What should I anticipate for sales over the next twelve months? $2 million is about right.

What if I found out that Home Depot in building a new store in Ossipee NH, directly across the street?

Should I expect a different answer? Yes.

What does this have to do with real estate in Ossipee NH or North Conway NH or anywhere in between?

That "Home Depot" has been being built and is ready to open. It is called ‘shadow inventory'.

Shadow inventory is made up of the homes not yet for sale in the North Conway to Ossipee (Carroll County) area, and the area, but are in these categories:

* Houses that have not come to market because the homeowners didn't put their homes up for sale in the last few years hoping that by waiting they will get a higher price.

* Homes that have already been reposed by the banks (REOs) but not yet on the market.

* Homes that are in already in the foreclosure process but have not yet been reposed by the banks.

* Homes that are 90+ days behind on their mortgage payments (less than one percent will ever catch up. 99% will become a distressed sale).

What number are we talking about?

Pent-up Selling Demand

Zillow just recently released a survey on the category of ‘pent-up selling demand'. They asked: “If you saw signs of a real estate market reversal in the next 12 months, how likely would you be to put your home up for sale?”

The actual numbers from responses:

* 5.3 million home owners would be ‘very likely' to put their home up for sale

* 6.1 million would be ‘likely'

* 10.6 would be ‘somewhat likely'

*Note* In 2009, 5.2 million homes were sold.

Types of distressed properties

Several organizations have attempted to quantify the other category (delinquencies, homes in the foreclosure process and REOs).

Here are their findings:

* The Mortgage Bankers' Association believes that there are 4.3 million homes in this category.

* Barclay's Capital puts the number at 4.7 million.

* Capital Economics puts it at 5.5 million.

* Morgan Stanley, from a recent study, claims 8 million.

All Shadow Inventory

If we take the lowest number in each category, there could be an additional 9.4 (5.3 + 4.1) million homes entering the market.

Vs. the 5.2 million properties sold in 2009.

What does this mean to you?

The price of homes for sale will be dropping every day. This does not mean that buyers should wait. Interest rates have pretty much nowhere to go but up and could quickly offset a 5% lower sale price. Sellers are the most affected because they will see their values dropping every day their home sits on the market. This further underscores the risk associated with picking the wrong broker. The real estate agent you know from the golf course or the breakfast counter may not be the guy or gal that can put your property in front of millions of consumers and develops a following by providing useful information such as this to add value to relationships before consumers become customers or clients.

Posted by

Thanks, Bill Barbin  Badger Realty LLC

     

Cellphone: 603-986-0385

Office: 603-356-5757

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