Lengthy Time on Market Keeping Short Sale Inventory High

Lengthy Time on Market Keeping Short Sale Inventory High
LinkedIn Digg Facebook
Mixx MySpace Twitter
Delicious Reddit Google Buzz


October 2011

By: Oscar Wei, Senior Research Analyst

California home sales declined slightly on a month-to-month basis, but continued to improve year-over-year for the third consecutive month in September. There were 487,940 sales of existing single-family homes in September, an increase of 4.1 percent from September of last year, but a decrease of 2.1 percent from 498,320 sales in August. The statewide median price dropped 3.2 percent from August and declined in year-to-year terms for the eleventh consecutive month, falling 8.3 percent from $313,460 to $287,440.

The supply of housing continued to be lean at the state level, with an unsold inventory index of 5.1 months for September, a slight increase from 5 months in August but a decline from 5.9 months in the same month of last year. However, inventory levels varied considerably across segments of the market. As discussed in last month’s article, inventory levels are tightest for Real Estate Owned (REO) properties, followed by equity or non-distressed sales, with short sale inventory considerably higher. In September, the unsold inventory index levels for these categories were 2.6, 5.9, and 7.9 months respectively. But with the short sale median price averaging nearly 40 percent higher than the REO median price since the start of the year, the question arises, why are short sale inventories so much higher than inventory levels for the other categories?