If home sales fall, you wouldn't generally expect prices to rise. Yet, that's exactly what happened in South Florida in October, according to Toluse Olorunnipa of the Miami Herald. The foreclosure freeze caused inventory to seem artificially lower, as the steady stream of defaulted properties hitting the market slowed. With fewer homes for buyers to choose from, prices rose. But while the universe of homes that buyers saw may have declined, so-called shadow inventory increased. In the article, Ron Shuffield, president of Esslinger-Wooten-Maxell Realty explains:
"We knew that this so-called shadow inventory was out there, now we can see it,'' said Shuffield. "It's sitting there, the banks already own it -- you can see that in the public record. It's just a question of whether they feel that they have dotted all their I's and crossed all their T's.''
While rising prices might seem like a good thing, under these circumstances, they aren't. Lower prices will help to allow the large inventory of homes to sell more quickly. Banks are holding back some of those from hitting the market, but they must release them eventually. Until all that inventory is worked through, the market won't experience an enduring recovery.
Read the full story at the Miami Herald.