Skip to main content
A scary good deal on trusted journalism
Get full digital access to globeandmail.com
$0.99
per week for 24 weeks SAVE OVER $140
OFFER ENDS OCTOBER 31
A scary good deal on trusted journalism
$0.99
per week
for 24 weeks
SAVE OVER $140
OFFER ENDS OCTOBER 31
// //

A sold sign is posted outside a recently sold home in Springfield, Ill. in this file photo.

Seth Perlman/The Associated Press

The U.S. home resale market seems to be running low on houses.

The National Association of Realtors reported Thursday that there were 1.74 million homes listed for sale but not yet sold in the United States in January – the lowest in 13 years.

Based on the current pace of resales, that's just 4.2 months of inventory – an eight-year low, and less than half that of just 18 months ago.

Story continues below advertisement

The thin supply comes amid stronger demand, as the U.S. housing market re-awakens from the nightmare of the late-2000s mortgage crisis.

January sales were up 9 per cent from a year earlier, and prices are up 12 per cent. The NAR cited the lack of inventory of unsold homes as a key driver in continuing price increases. It even argued that sales growth would be even higher, if only there were more homes to sell.

But here's the thing: There are. They're just not on the market. Yet.

The NAR's numbers ignore the so-called "shadow inventory," the vast number of homes on which lenders have foreclosed, but have been unwilling to put up for sale due to still relatively weak prices and fears of flooding the market with cheap supplies that would hurt pricing power.

(Indeed, the NAR's survey of realtors last month found that foreclosed properties – which accounted for 14 per cent of January's home resales – sold for an average of 20 per cent below prevailing market prices.)

The shadow inventory at the end of 2012 was estimated at 3.53 million. It has been shrinking gradually from its peak of 5.4 million at the end of 2009, but the number is nevertheless still substantial.

It suggests the supply of unsold homes in the U.S. market, more realistically, is about triple the multi-year-low number the NAR cited in Thursday's report. (Compare that with 1999, the last time the inventory of home listings was as low as it is now – the shadow inventory was about 650,000 homes.)

Story continues below advertisement

Indeed, the thinning supply of homes officially listed for sale could well trigger the release of more of this shadow inventory into the market.

Lenders sitting on the properties have been waiting for better returns on their underwater investments and more favourable supply-and-demand conditions in which to unload homes that, let's face it, are essentially unwanted headaches. They're getting both.

But this release of shadow inventory could also have a cooling effect on the U.S. home market in the coming months. The market for home sellers in the U.S. is certainly improving, but this inventory overhang still means it may not be nearly as hot this year as the realtors would like to believe.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies