Will Housing Feel a ‘Saw-Tooth’ Effect?
Some housing experts are predicting what one calls a “saw-tooth bottom” to the housing market driven by a shadow inventory that may include up to 4.5 million properties.
This issue isn’t just bank-owned homes that aren’t yet on the market, but sellers who would like to sell but fear they can’t. “These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there’s a hint of good news,” says Leslie Appleton-Young, chief economist for the California Association of REALTORS®.
This rush to sell drives prices back down — hence, the “saw-tooth” description.
Stan Humphries, chief economist for Zillow.com, describes the potential problem this way: “Prices go up; inventory rises, which sends prices down again. That plays out for three to five years of no appreciation. … Without price appreciation, it leaves more home owners in negative equity. That’s toxic. Any setback, like a job loss, they go into foreclosure.”
Source: CNNMoney.com, Les Christie (05/17/2010)
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