Here’s a New Problem for the US Housing Market

The U.S. housing market (NYSE:IYR) offers a major conundrum for economists and forecasters.

Inventory levels are down 20% from last year, and that would be a great thing for stabilizing housing prices. However, the supply shrinkage is not because of buying interest, rather because sellers are simply not interested in the current available inventory. That’s bad news and likely means houses need to be repriced lower.

Moreover, banks (NYSE:KBE) are slowing repossessions given the recent scandal on processing irregularities. So, supply has shrunk, but prices are not moving up due to soft demand, according to

Prospective buyers are also wary of the estimated one million homes that may come on the market from sources such as foreclosures and other distressed disposals. However, according to agents, nobody’s complaining primarily about pricing or interest rates – the problem now is finding a dream home.  According to real estate industry executives, “shortages of well-priced and attractive homes are a bigger drag on sales than sluggish demand.” Sounds like another excuse to us.

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