House hunters are still finding bargains in southern New England, but they have a lot less to choose from than they have in years.
Even as prices have started to climb, the number of homes for sale in the Providence area continues to fall from both the exuberant boom years and the five years since the crash.
In Rhode Island, the 5,118 single-family homes on the market in September were the fewest for the month since at least 2006, the last year monthly figures were available, when there were 6,883 listings, according to the Rhode Island Association of Realtors. There were 5,293 houses on the market in September 2012 and 6,416 in September 2011.
But while fewer homes on the market means fewer chances for a commission, real estate agents say tight inventory isn’t necessarily a bad thing.
Inflated inventory during the boom years was echoed after the crash when homes purchased with easy credit returned to the market in the form of short sales and foreclosures. That inventory of distressed properties drove down real estate values across all segments of the market.
“We had such an abundance of properties, we are just now getting back to a balanced market, around a six- or seven-month supply,” said Victoria Doran, president of the Rhode Island Association of Realtors. “We had almost 15 months of inventory and that makes it too much of a buyers’ market. Certainly we would like to see more on the market, but it took months to get balance.”
Although it seems obvious that inventory would be lower than it was during the bubble, the fact that it has continued to fall has surprised some in the industry.
At various times, real estate trackers have offered warnings about a “shadow inventory” of distressed properties being held by lenders, while others have predicted prospective sellers who sat out the recession would list their homes once they saw prices rebound.
Doran expects to see inventory surge next spring.
But even if homeowners do decide to test the market in 2014, inventory could remain low due to continuing declines in foreclosures and short-sale activity.
In fact, the easing of Rhode Island’s foreclosure problem has been the major driver of not only declining inventory but increases in median sale prices.
The Providence metro-area foreclosure rate fell to 2.26 percent of all outstanding mortgages in August, a 0.73 percentage-point decline from the previous year and nearly full percentage point decline from January 2011, according to CoreLogic.