More signs that a slow, sluggish real estate recovery is here


CLARKONOMICS: I have some promising signs to share today that indicate the bleed is over and a sluggish recovery in real estate is already happening — even in one of the hardest-hit markets in the nation.

The Orlando Sentinel has compiled new numbers on the Central Florida market and finds that houses are now taking 99 days to move from being listed to going under contract. In addition, the theoretical sell-through rate in Central Florida is now at 6 months and change. (This number refers to how long it would take for all currently listed houses in a market to sell if no new listings come into the picture.)

That’s a massive change from what we were seeing during the bust. And these numbers are from the notorious bubble state of Florida! So the positive news is that buyers have returned.

On the negative side, much of the action remains purchases of distressed sales. The reality is we went through a long period when even the scavengers would not participate in the market. So today’s buyers are signaling that they believe this is the buying opportunity. (Yet it doesn’t mean we’ll have a repeat of last decade where housing values ratcheted up month by month.)

There’s another factor here that we need to talk about and that’s shadow inventory. Shadow inventory comes in 2 flavors — either real-estate owned by the banks or by homeowners themselves.

Right now, shadow inventory is being piecemealed out into the marketplace. Banks don’t want to flood the market with their zombies that aren’t yet foreclosures. They’d rather pace the entry of those properties into the market. Ditto with homeowners who own properties like condos that they can’t afford to sell for a loss.

In addition, you also have companies that do commercial workouts. So if there’s a 300-unit new construction condo building where the builder fails, the workout people come in and clean up the mess by unloading those nice, new condos. But the workout companies aren’t dumping all 300 units into the market at once. They’re putting 10 up for sale and then another 10 when those sell.

So the recovery in price will be sluggish because of all these sellers in waiting. This means you don’t have to jump in right now with both feet because good deals are still to come.

But I do ultimately see it all meaning that the bleed is over and the recovery, slow as it will be, is under way.

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