Final Thoughts On The Real Estate Shadow Inventory III

Posted by Joe Manausa on Friday, June 11th, 2010 at 12:30pm.

The real estate shadow inventory might be the most significant problem in the history of the housing market, yet nobody is paying attention.

Based upon the feedback that I received on the first two posts in my series on the Real Estate Shadow Inventory, I can tell that many real estate professionals around the country do not even have a great awareness of its impact in their market area. I have pointed out recently that I think the shadow inventory might be the most significant problem in the history of the housing market, yet the majority of my peers don't think the problem is nearly that large.

If you did not catch my first post titled Measuring The Shadow Inventory or the second one titled More Real Estate Shadow Inventory, I recommend reading them as much of what will follow is just a continuation of those thoughts and statistics.

Today, I will temporarily complete this series with a look at some specific numbers in some of the larger Tallahassee neighborhoods. As a recent reader "Tim" pointed out, the raw numbers of 5,143 "failed" listings over the past 30 months needs more context. So what I did was grab 10 troubled neighborhoods and performed a simple analysis of how many homes had failed to sell in the past 30 months (homes that did not sell and are currently NOT on the market), and then added the homes that were on the market.

The resulting "Real Supply" represents the number of homes that need to sell in each neighborhood, NOT INCLUDING mortgage lates and foreclosures not yet on the market. That means the following information is actually BETTER than what is truly "out there."

Troubled Tallahassee Neighborhoods

Neighborhood Failures Homes For Sale Annual Sales Months Supply Months of Failures Real Supply
Killearn Acres 67 33 52 8 15 23
Killearn Lakes 110 81 82 12 16 28
Summerbrooke 39 23 26 10 18 28
Killearn Estates 121 91 83 13 17 31
WOODBRIAR 29 28 19 18 18 36
Ox Bottom Manor 35 25 19 16 22 38
Southwood 143 93 65 17 26 43
Golden Eagle Plantation 75 37 27 17 34 50
Wolf Creek 38 17 8 24 54 79
Brighton Place 44 6 6 12 88 100

So, as an example, Golden Eagle has 50 months of supply (yes, over 4 years) when we consider everything on the market as well as everybody who recently tried but failed to sell their homes. Of course, this does not include:

  • people who know how tough the market is and are waiting for it to get better
  • people who are significantly late on their mortgage but not yet listed
  • properties in the foreclosure process not yet on the market
  • foreclosed properties that the banks have yet to list

The column on the far right in the table above reflects Tallahassee housing supply measured in months of supply. While I do not have the resources to perform this analysis on all the neighborhoods in town, I suspect our full supply of homes, both in the shadows as well as on the market is between 3 and 5 years (meaning if no new homes hit the market in the next 3 to 5 years, we have enough current supply to handle 100% of the buyers for the next 3 to 5 years).

That is why home owners who are only idly thinking about moving need to know that they should stay out of the market. If somebody is considers themselves a very serious seller, they need to sell their homes quickly in order to get the best price possible for the foreseeable future. Any delay will cause the home seller to get a reduced price. So, are you serious above moving?

Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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