The number of vacant homes for sale declined 2.4% in the third quarter from the same period a year ago, according to the Census Bureau, but the housing market still suffers from a glut of 1.93 million vacant homes, which is exerting downward pressure on values.
Economists at the National Association of Home Builders would like to see the inventory number fall to 1.5 million units because the current overhang makes it difficult to sell new homes.
But builders realize it is going to be a long, slow process until there is a significant drop in foreclosure and REO sales. "It's a complicated problem, but I think we are making slow and steady progress," said NAHB senior economist Bernard Markstein.
Builders have sliced their inventories of newly built homes by 64% since July 2006. (Builder inventory has been reduced to a level not seen since 1968.)
Foreclosure and short sales make up 35% of existing home sales, according to the National Association of Realtors. (Strong REO volumes have kept the supply of previously owned homes at high levels.) "We have been chipping away at it, but it is elevated due to distressed sales," said NAR spokesman Walter Maloney.
Due to recent problems with the foreclosure process and title issues, NAR has seen some banks pull REO off the market and cancelled sales. "You might see those inventory numbers move up in October," Maloney said.
But the Realtors expect the disruptions will be short term. In a recent survey, over 20% of Realtors said they had clients who were no longer interested in buying foreclosed properties. The trend, however, is probably temporary "because a lot of the ambiguity over title has been clearing up," said the spokesman.
