How will supply and demand affect the North Conway NH area real estate market in the coming months?

Written By REALTOR Bill Barbin

of Badger Realty

Supply and demand is a relatively simple concept. The principle of supply and demand is evident in real estate for sale at either end of Carroll County, from North Conway NH and Jackson to Wakefield NH and Ossipee NH. In the North Conway NH real estate market we need to look into the future supply just like any other industry. As an example, let's assume I own a hardware store in town. I have done $1 million in retail sales each and every year for the last ten years. What should I budget to do in sales over the next twelve months? $2 million is about right. However, if I found out a Loews or Home Depot was building a store in the vacant lot across from my store, should I change my plotted budget? Yes.

What does this have to do with real estate in Ossipee NH or North Conway NH or anywhere in between? That "Home Depot" has been being built and is ready to open. That "Home Depot" is what is being called "shadow inventory."

Shadow inventory is made up of the homes not yet for sale in the North Conway to Ossipee (Carroll County) area, and the area, but are in these categories:

• The houses where the owners have put life on hold until the market recovers and have been waiting it out for the last 4 years but can't wait any longer.

• Homes that have already been reposed by the banks (REOs) but not yet on the market.

• Homes that are in already in the foreclosure process but have not yet been reposed by the banks.

• Homes that are 90+ days behind on their mortgage payments (less than one percent will ever catch up. 99% will become a distressed sale).

Selling Demand that has been pent up.

Zillow just recently released a survey on the category of ‘pent-up selling demand'. They asked:

"If you saw signs of a real estate market turnaround in the next 12 months, how likely would you be to put your home up for sale

The actual numbers from responses:

• 5.3 million home owners would be ‘very likely' to sell their home.

• 6.1 million would be ‘likely'

• 10.6 would be ‘somewhat likely'

*Note* In 2009, 5.2 million homes were sold.

Types of distressed properties

There have been several organizations that have attempted to quantify the other category (delinquencies, homes in the foreclosure process and REOs). This is what they found:

• The Mortgage Bankers' Association states that there are 4.3 million homes in this category.

• Barclay's Capital says 4.7 million.

• Capital Economics puts it at 5.5 million.

• Morgan Stanley, from a recent study, claims 8 million.


Total Shadow Inventory

By conservatively taking the lowest amount in each category, we are talking about approx. 9.4 million homes entering the U.S. real estate market.

Again, by comparison, 5.2 million existing homes were sold during 2009.

What does this mean to you?

There will be a enormous downward pressure on prices in the coming months. For buyers this may easily be offset by interest rates that have nowhere to go but up. The real impact is on the sellers whose values are creeping or running downward every day.