Pent-up Supply

First, hat tip to Calculated Risk for posting the information and drawing attention to the shadow inventory issue:

Zillow: High Percentage of Homeowners Waiting for a Market Turnaround

From Zillow:

Homeowner Confidence Shrinks; Most Americans Now Believe Their Home’s Value Has Declined

As for selling activity, it’s clear a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31 percent of homeowners said they would be at least “somewhat likely” to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround(3).

Humphries continued, “Also interesting is the information we have for the first time this quarter on the levels of ‘shadow inventory’ – homes that people would like to sell but that aren’t currently on the market, and thus aren’t captured in the official number of homes on the market. With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices.”

We’ve heard plenty of talking heads mention the loads of fence sitters, pent-up demand, and sideline buyers just waiting to jump into the market, but what about pent-up supply? Sellers on the sidelines, waiting for a better market to sell their homes? While pent-up demand creates a price floor, because buyers move in to the market when prices fall, pent-up supply causes a pricing ceiling, as sellers list homes when they see signs of price improvement. In the current market, the pent-up supply will do worse than cause a price ceiling, it’ll cause further downward pressure on prices.

According to the Zillow data, some 20% of homeowners surveyed in the Northeast would be very likely to list their home for sale, a percentage significantly higher than in any other area. Roughly 40% of those surveyed indicated some interest in selling? If even a half of those surveyed follow through, the amount of shadow inventory is staggering.

And yet another reason why we’re not at the bottom yet, and why home prices will not rebound quickly after the crash.

This entry was posted in Economics, Housing Bubble, New Jersey Real Estate. Bookmark the permalink.

49 Responses to Pent-up Supply

  1. grim says:

    From the Record:

    Corzine: State will cut another $1.2B

    Governor Corzine said today the state will cut another $1.2 billion in spending before the end of June to make sure the current budget year ends without a deficit.

    The governor also announced he will be coming out next week with $2 billion in new cuts for the budget year that begins in July.

    Both steps are in response to revenue drop offs that weren’t projected when Corzine presented his $29.8 billion spending plan for the new budget year back in March.

    To get out of the current budget year without a deficit — something the New Jersey constitution requires — the state will use $450 million from surplus funds and push another $450 million in planned expenses, including school aid payments, into the new budget.

    The state will also reduce its annual pension contribution by $150 million and make another $150 million in cuts to department spending, which will be announced Friday.

  2. make money says:

    Pent up supply?

    Aren’t there a few bagholders here that are under water and would love to dump their POS.

    Whatever happened to Donald?

  3. Traitor nom deplume says:


  4. chicagofinance says:

    grim: PLEASE adjust heading to say “PANT-UP”

  5. SG says:

    Cleveland Fed Offers Plan To Break Housing Crisis Cycle

    “Many people in fact blame the slowdown in the housing market for causing the subprime mortgage meltdown and subsequent crisis,” Yuliya Demyanyk, Senior Research Economist at the Fed branch said. “We show though that the crisis or the problems were building up for about 6 consecutive years before the crisis and the housing prices declines in fact revealed those problems, not caused them.”

    To break the cycle, researches at the Cleveland Fed suggest several steps, many of them borrower focused. Preventing foreclosures is an important step, and they suggest that providing financial incentives to mortgage lenders to modify loans, possibly lowering interest rates, allowing borrowers to stay in their homes.

    If modification is not an option, lenders could help cut down on the abandoned property problem by allowing borrowers to stay in the home by converting them from owners to renters.

  6. afe says:

    realestatelady (163 – last thread) – I am not blaming you for how bad the market is – what I am asking for is for you & your colleagues to stop with the interest rate bull*hit. The NAR needs new selling points pronto! How much pressure agents decide to exert on the sellers to price to market is their own business…unfortunately, all of the factors I outlined above have not jump-started sales including the infamous “historically low interest rates”. IT DONT MATTA!

  7. grim says:

    From the Star Ledger:

    Chrysler names 30 N.J. dealerships targeted for closure in bankruptcy filing

    Thirty New Jersey car dealerships could lose their Chrysler brands under the company’s plan to eliminate nearly one-fourth of its U.S. dealerships.

    The company filed a plan in bankruptcy court today to eliminate 789 of its dealerships nationwide. The company says many of the dealers’ sales are too low and that they often compete with one another.

  8. #6 The two in Monmouth County are fairly well know dealerships. There are a bunch of smaller, mom and pop sized dealers I would have expected to see on that list first.

  9. BC Bob says:

    “31 percent of homeowners said they would be at least “somewhat likely” to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround”

    Textbook. Pie in the sky sell limit orders. Not one of them could smell a scent of the market implosion. What makes them think they could recognize a turnaround? Prices will continue to fall during the first 12 months of any underlying strength. What will they focus on? Should read, 31% will chase the market down and the majority will capitulate at/near the lows.

  10. d2b says:

    789 dealerships closing which could put 38,000 people out of work. (abc news)

    Tomorrow it’s GM’s turn. Could be 2600 dealers.

  11. yikes says:

    black friday for GM tomorrow

    surely the market will soar 300+ points

  12. Sean says:

    SEC to charge itself with insider trading.

    On CBS news right now.

  13. Sean says:

    Iceland on the Thames.

    Rents crashing in London to 1991 prices.

  14. 3b says:

    I know, I know, the one listed below we have seen before. But, I am sure that if they wait until sometime in the next 12 months, they will get their price of 650k!!

  15. Firestormik says:

    Speaking of Chinese cars again

  16. Stu says:

    It appears that with SAS out of the picture, there is not much action here at night blokes.

  17. stan says:

    Has anyone noticed a void the past week or so? I for one am enjoying the absence of the boards resident knucklehead (who’s name I won’t mention).

    Perhaps he has gone the way of richard?

  18. grim says:

    #16 – Usually happens around the time of the full moon.

  19. Firestormik says:

    BEIJING (AFP) — A Chinese county has dropped a plan to order its officials to collectively smoke nearly a quarter of a million packs of cigarettes after a public outcry, a report said.

  20. still_looking says:

    Fire, 19

    I guess their air pollution isn’t enough to wreak havoc on their health….



  21. still_looking says:

    From the same article in 19:

    More than half of all male doctors in China smoke, but the government is now trying harder to get them to kick the habit in order to set an example for others, state media reported recently.

    I guess I should give up my scotch habit?

    sl (hah! Never!)

  22. Firestormik says:

    I guess they are running out of ideas where to sell the cr@p they make

  23. Sean says:

    SL habit? I thought it was a passion?

  24. Sean says:

    re# 16 Stan- no worries that “investor” is busy getting ready for the “More Tarp NOW dammit” rally down in DC this weekend.

  25. veto that says:

    I knew he was secretly lurking these boards, the only question now is what handle he was using…

    Obama Says U.S. Long-Term Debt Load ‘Unsustainable’

    “We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

    Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

    “Most of what is driving us into debt is health care, so we have to drive down costs,” he said.

  26. Pat says:

    listen, veto…if you were unable to get to the ‘truth’ or even the ‘untruth’ and you knew you had a bunch of yes-wo/men around you, would’nt’ you be tapping places where real people give anonymous opinions?

    How could anyone in a public position not be drawn to blogs?

    Why does Bill Maher all of a sudden look like Billy Crystal in Princess Bride?

  27. yikes says:

    Disclosure because we own/trade SRS or FAZ? Hell, we shouldn’t even be talking here. We oughta be collecting bullets, seeds and fuel and getting ready to move to higher ground.

    The tsunami is coming. 2-3 more weeks, all hell breaks loose.

    why can’t you get on TV and tell it like it is? The people need to hear the real story.

    one more week of American Idol, LOST is over … i think once summer hits, the SWHTF.

  28. Sean says:

    re: #25 – I heard Larry Summers has been driving around the West Wing all week on a Segeway scooter yelling securitized Subway sandwiches made in China are good for America.

  29. stan says:

    I watch little tv other than sports. Work, late dinner, try to get to the gym etc cuts into following a program.I did just watch 30 rock, it is a must see for me now.

    Not a huge Baldwin fan, But Jack Doneghy slays me.

    I actually met he and kim basinger when I waited tables in s’hampton circa 1998. He left me a 50% tip.

    Sorry- no JOHN story here

  30. Sean says:

    Stan – what is Mr. May’s nickname in the dugout?

  31. Essex says:

    Baldwin makes the show….

  32. stan says:



  33. Sean says:

    stan – sports question about Arod, any never mind me I am bored without the tinfoil hat crowd that this blog attracts.

  34. stan says:


    Cmon, give me the answer

  35. Sean says:

    Stan – heard from anold friend who played for Toronto, he told be it was what you would call a man in a gym with female chest.

  36. stan says:

    Hehehe. Nice. I could see that…

  37. AstoriaMike says:

    I’m just wondering about something and would love to hear from those of you wiser than I with opinions more circumspect than mine.

    If sellers are waiting for an indication that the market is in an upswing before listing their homes, and eventually they get enough indication to jump in, flooding the market, two buyers reactions could be “prices are headed up and we should buy now” or “there is a glut of homes on the market, and they will all drop together as competition becomes stiffer”.

    If the first reaction, sellers win and buyers are striving to buy fast, even when that property is over-valued. If the second, NOTHING will sell and sellers will still believe that the market is in recovery (they took the step to list their home), and be more willing to leave their home on the market without a reduction.

    It is my opinion that because of the national spin on the surface of the housing bubble, by the very nature of more homes coming onto the market at somewhat reduced prices, buyers will have the former reaction, sending perceived home values higher, i.e. a new short-term bubble, pre-primed to pop when qualified buyers who are on the sidelines peter out.

    I would think the difficulty in getting a loan would deflate a major bubble before it got real steam behind it, but how deep do you think the list of qualified buyers is who have been timing the downturn for a bottom? If it is long, then I predict a long bounce in pricing before a second smaller price drop and flat line.

    -am, just lurking around

  38. BklynHawk says:

    I wonder how many in each of those groups of respondents are facing some kind of financial difficulty. Or, you wonder if those with financial problems didn’t respond at all or were much less likely to and biased the results? That could be a whole other factor in “pant up” supply.

  39. grim says:


    Day Pitney lays off 20 attorneys

    Day Pitney has laid off 20 attorneys this week, including four from the Hartford, Conn., office and six from Florham Park, N.J., firm officials said Wednesday. Day Pitney’s other Connecticut offices also were affected. Three Stamford-based attorneys were let go along with one attorney each in New Haven and West Hartford. Greenwich was untouched. The other five cuts were in the New York and Boston offices.

  40. Shore Guy says:

    So, has the supply got people panting yet?

  41. Dissident HEHEHE says:

    How about the Prez coming out and talking all Libertarian yesterday over gubmint spending after spending $3T?

    As Gerald Celente put it “You will know me by my actions”.

  42. reinvestor101 says:

    What?? Is this some damn thinly veiled reference to rock ribbed American patriots like me? Why can’t you just name names Wuss?

    Let’s get something straight, I’m like AIDS. It may go into remission but it’s always there and you can’t get rid of it, so you just learn to live with it. I will NEVER leave this damn board as long as there is a single real estate terrorist trying to stomp out any little green shoot pushing its way up through the damn soil.

    There, now what are you going to do about it? Yeah, that’s what I thought. Behave yourself in the future.

    stan says:
    May 14, 2009 at 8:52 pm
    Has anyone noticed a void the past week or so? I for one am enjoying the absence of the boards resident knucklehead (who’s name I won’t mention).

    Perhaps he has gone the way of richard?

  43. Joey says:

    In regards to the CBS News item “SEC to charge itself with insider trading”, next I’d like to see the headline “Bank forecloses on itself”.

  44. borat obama says:


  45. Ellen says:

    #38 Astoria Mike –

    Don’t think I’m wiser or more circumspect than you, but that’s not going to stop me from disagreeing with you. ;)

    Selling one’s house is a huge, life-altering decision. If 20% of folks around here are contemplating it, you can be sure there’s a good reason behind it, e.g. back-breaking mortgage, lousy school system, lousy commute, etc. Problems like that don’t just disappear. Eventually, some, perhaps even a majority of that 20% will feel forced to sell their homes, financial loss or not.

    Here’s a real life example. My next door neighbor is a senior citizen who knows she can’t maintain her house much longer. She’s waiting and hoping for the market to come back, but she also knows for certain that in five years she will not be in that house.

  46. confused in nj says:

    The president of Brazil says “opposing” homosexuality makes you a sick person, and he believes such thoughts need to be criminalized.

    It was only a few decades ago when the American Psychiatric Association listed homosexuality as a mental disorder, before it succumbed to a pro-“gay” campaign to discontinue that definition.

    Now Brazilian chief Luiz Inacio Lula da Silva, who won a narrow re-election following a cash-for-votes scandals, has held the First National Conference of Gays, Lesbians, Bisexuals, Transvestites and Transsexuals to condemn the biblical belief that homosexuality is wrong.

    Lula, on June 5, not only officially opened the event to promote homosexuality across his nation but also issued a presidential sanction for the conference.

    Calling for “the criminalization of homophobia,” he said opposition to homosexuality is “perhaps the most perverse disease impregnated in the human head.”

    He said “prejudiced” people need to “open their minds and clean them.” Other speakers encouraged homosexuals to claim to be part of a civil rights campaign that already has brought reforms for treatment of blacks, the elderly and the disabled. They also announced the nation’s public hospitals soon would begin to perform sex changes on people.

  47. woodisgood says:

    Long-time lurker.

    My wife and I have been looking to buy a 350/400K 3 bedroom/1+ bath in the Cranford/Westfield/Fanwood area since February. Perfect credit, preapproved, nothing to sell, ready to move whenever. There has been virtually NOTHING worthwhile to even halfway consider buying. Our main requirements are that we be able to walk to the train (.8 miles or less) and the house must have central air. The asking prices are laughably ridiculous, and the amount of these houses on the market very few.

    I mention this as this article above definitely resonates with us. Everyone has been telling us, “Oh, you’re in amazing shape, perfect time to buy, you’ll find something!” Not if people aren’t putting their houses up for sale. Depressing because we are so ready to move and buy!!

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