Shadow inventory & reverse mortgage home values

The coming shadow housing inventory and home prices

Home listing prices are dropping in several metros across the country but certainly not in all markets. In fact, if you look at your local home listings in the MLS (Multiple Listing Service), Zillow, or Redfin you’re likely to notice that there are far fewer homes listed for sale today than there were just months ago.

But more importantly, you may see home sellers stubbornly listing their homes at 2021 prices with 2023 interest rates. A disconnect from reality? Perhaps, but it’s also indicative of a frozen real estate market. 

Reverse mortgage professionals are particularly keen on home price trends in their markets because it determines if a borrower may qualify for a reverse mortgage or receive enough loan proceeds to meet their objectives. While the housing market is somewhat stalled, a backlog of shadow inventory may finally hit the market in late 2023.

The term shadow housing inventory is somewhat broad so let’s define it.

 

Shadow inventory may include homes presently owned by residents or investors who are waiting for more ideal selling conditions or REOs (real-estate-owned) properties that are in foreclosure that won’t hit the market for several months. However, a third element of shadow inventory is generally overlooked. New single-family construction. 

In 2020 there were 523,000 single-family units under construction. That number surged to a high of 811,000 units in 2022 despite supply chain disruptions and spikes in building supply prices. As of March Realtor-com shows 735,000 single-family units being built. With supply issues generally resolved and material pricing dropping substantially many of these units will become active listings later this year. The pipeline of homes under construction will help boost housing inventory back to levels seen in a normalized housing market. 

Single-Family Homes Under Construction (Snapforce)

For example, if you add 735,000 single-family homes under construction today to the present 562.565 available homes in inventory we would return to pre-pandemic inventory levels last seen in late 2018. Removing the barrier of artificially tight inventory will increase supply significantly and consequently, the log jam in home prices will be broken allowing prices to reflect the current economy and mortgage interest rates.

Single-Family Home Inventory (Snapforce)

In conclusion, reverse mortgage professionals may find benefit in tracking housing inventory and construction trends in their markets to anticipate which areas may see sizable reductions in home prices. This research may reveal which areas will be more or less susceptible to large declines in value when housing inventory returns to its pre-pandemic norm.

Postscript:

Snapforce is the tool we use to look at the macro and local market housing trends. This tool was featured in our February 27th broadcast of the Industry Leader Update. Those wishing to research their markets can subscribe to Snapforce for $12/month here.

12 Quotes that Inspire

reverse mortgage sales

‘Believe me, we all need this now more than ever.’

Now more than ever we are keenly aware of the collective tension and anxiety in society. Considering this how you care for your mind, will, and emotions are crucial not only for your own happiness but for the welfare of those around you.

This week I am sharing some of the quotes that have helped me ‘right the ship’ and endure some difficult moments. Whether you are facing fear, loss, anxiety, anger, or hopelessness I hope you find some value in these written words. I only ask that if you feel lifted to add your own encouragement or inspirational quotes- just leave them as a comment on this post.


“Circumstances don’t make the man (woman); they only reveal him to himself.” — Epictetus

“We must accept finite disappointment, but we must never lose infinite hope.” – Martin Luther King, Jr.

“If all our misfortunes were laid in one common heap whence everyone must take an equal portion, most people would be content to take their own and depart.” — Socrates

“Action may not bring happiness, but there is no happiness without action.” — Benjamin Disraeli

“You are what you do, not what you say you’ll do.” — Carl Jung

“It is the mark of an educated mind to be able to entertain a thought without accepting it.” — Aristotle

“Take time to deliberate, but when the time for action comes, stop thinking and go in.” — Napoleon Bonaparte

“In any moment of decision, the best thing you can do is the right thing, the next thing is the wrong thing, and the worst thing you can do is nothing.” — Theodore Roosevelt

“Just as despair can come to one only from other human beings, hope, too, can be given to one only by other human beings.” – Elie Wiesel


“Never give in. Never, never, never.” – Winston Churchill

“Prosperity is not without many fears and disasters; and adversity is not without comforts and hopes.” – Francis Bacon

“Courage doesn’t always roar. Sometimes courage is the quiet voice at the end of the day, saying, “I will try again tomorrow.” – Mary Anne Radmacher