Screamingly cheap home prices won't be around forever
The recent news that the number of unsold homes held by banks was shrinking is good news for homeowners and bad news for home buyers.
If you’re trying to sell a home, this decline is good news, because foreclosed homes sell at a discount, which lowers the value of nearby homes. Having fewer foreclosures and short sales in your neighborhood helps keep your home’s value stable.
If you’re trying to buy a home, this is bad news, because when this inventory of unsold homes disappears, bargain home prices might disappear, too.
As of July, the last month for which data are available, there were 1.6 million of these properties, known as shadow inventory -- 770,000 homes where the owners were 90 days or more late on their mortgages, 430,000 homes in some stage of foreclosure and 390,000 foreclosed homes owned by mortgage bankers, according to the market analysis firm CoreLogic.
While that sounds like a lot of homes, it’s actually 22% fewer than at the peak of the housing crisis in January 2010, when there were 2 million homes in this category. At the current sales pace, CoreLogic estimates it would take five months to sell off these properties.
This category of homes is shrinking mostly because the rate of new homeowners getting into financial trouble has slowed, CoreLogic says.
On the demand side, home sales are not picking up, because mortgage lenders are making it so tough to get a loan. Even home buyers with good credit who are buying homes at prices they can afford to pay are having a hard time getting a loan.
So if you’re looking to buy a home, there are still bargains to be had -- just be sure you shop for a loan before you shop for a house, because getting a mortgage is now the toughest part of becoming a homeowner.
You can start by comparing mortgage rates in our database.