Mar 18 - Cheap home prices luring hordes of cash-wielding investors back to the housing market is one reason behind a severe shortage in available homes for sale, sending home builder sentiment to a five-month low in March. Fred Katayama reports.
Homebuilders are feeling less confident, partly because they're having a hard time getting credit. The housing market index in March fell to its lowest level in five months. Builders will need to get a lot more bullish for this market to overcome its latest challenge ---- the housing surplus has turned into a housing shortage. And it's severe. Look at Riverside, California, the turf of broker Will Herring: SOUNDBITE: WILLIAM HERRING, OWNER-BROKR, BAXTER WELLINGTON REAL ESTATE (ENGLISH) SAYING: "Inventory in our area is very short. We average in our good years about 2200 listings active at one time. Current inventory is about 360 units." Nationally, in 2008, the market had more than 10 months supply of homes. As of January, that had shrunk to just 4 months. REPORTER ON CAMERA: FRED KATAYAMA, REUTERS REPORTER (ENGLISH) SAYING: A major reason for the shortfall: a stampede of investors big and small. They make up a fourth of all purchases. Instead of flipping homes, they're renting them out, keeping them off the market. National Association of Realtors Chief Economist Lawrence Yun: SOUNDBITE: LAWRENCE YUN, CHIEF ECONOMIST, NATTIONAL ASSOCIATION OF REALTOR (ENGLISH) SAYING: "That is due to investors coming into the market, many times buying all cash, so they're completely by passing the mortgage process." Indeed, the percent of homes bought with cash more than doubled in large metro areas over the last seven years to nearly 37 percent. Another problem: fewer foreclosed homes are up for sale, notes Daren Blomquist of RealtyTrac. SOUNDBITE: DAREN BLOMQUIST, VICE PRESIDENT, REALTYTRAC (ENGLISH) SAYING: "We're seeing a shortage across the country because foreclosures are going down. Distressed properties are going down in terms of numbers available for sale." Plus, home builders are having a hard time getting construction loans, so they're building fewer homes ... one third shy of the norm. On top of the shortage, there's a spike in demand for homes as the job market improves and interest rates stay low. SOUNDBITE: WILLIAM HERRING, OWNER-BROKR, BAXTER WELLINGTON REAL ESTATE (ENGLISH) SAYING: "There's multiple offers. In my last listing had up to about 22 offers." So what does all this mean for the alleged housing recovery since short supply and high demand equals higher prices? Some analysts say this rebound from the worst housing market since the Great Depression is real. Investors are coming in with cash, so there's less chance of default. We'll get a look at the latest health of the housing market this week, with data on housing starts, building permits, home prices and sales. And expect better earnings results from Lennar and KB Homes as the multiple bidding frenzy puts buyers in a tizzy.