A new article came out from the Mortgage Daily News that defined a new study that explains, in part, why inventory is so low – leaving buyers with no options to buy. Check it out…
A study entitled “The Great Recession and Attitudes Toward Homebuying” sponsored by MBA’s Research Institute for Housing America (RIHA) concluded that prospective homebuyers believe now is a good time to buy, given today’s low home prices and low mortgage interest rates, but potential sellers are nearly unanimous in reporting that it is not a good time to sell a home, citing difficulty in finding buyers at desired sales prices.
The study was conducted by Professor Gary V. Engelhardt of Syracuse University utilizing 30 years of data from the University of Michigan’s Survey of consumer attitudes toward homeownership before, during, and after the recent recession.  Key findings from the study include:

• Despite the current situation with high unemployment and slow economic growth almost 80 percent of American households believe that now is a good time to buy a home.
• The current recession is notable for the deeply negative sell-side of the market where positive sentiment is at an historic low. This is strongly related to difficulty in finding buyers at desired sales prices and to the shadow inventory of delinquent mortgages that may become foreclosed properties.
• Over the last two decades, the value of mortgage purchase originations has tracked home-selling sentiment more strongly than home-buying sentiment.
• The current positive home-buying attitudes and negative seller-sentiments are forecast to remain fairly constant over the next five quarters. This suggests that selling sentiment and, hence, market activity, will remain sluggish in the near term.
• Positive sentiment toward homebuying is particularly strong among young, education, white and Hispanic households.

Engelhardt said the pattern of home-buying sentiment during the current recession looks very similar to that of past recessions. Homebuyer sentiment falls as the unemployment rate increases, and improves as job growth returns and housing becomes more affordable.  “What distinguishes the current recession, though, is the dramatic decline in home-selling sentiment. From 1992 through 2005, positive home-selling sentiment fluctuated between 40 and 60 percent. Since 2005, sentiment has dropped precipitously, to around 7 percent currently, even while home-buying sentiment remains high.”
He said that potential sellers have not adjusted their price expectations fast enough to bring buyer and seller expectations in line with each other as market values have fallen.  “There are a number of likely reasons for this,” he said.  “First, seller-expected prices may be tied to key past market values, such as the purchase price of the property, or what a comparable property may have sold for in the recent past. Second, underwater homeowners cannot adjust their minimum sales prices much below the outstanding mortgage balance, because they would need to bring cash to the table at sale. And finally, with large declines in market values, sellers now hold a highly leveraged option that pays off with any future increase in prices.
“I expect that over the near term, positive home-buying sentiment will remain at levels typical of the last 30 years. In contrast, positive home-selling sentiment is expected to remain at historic-low levels. This suggests that market activity will likely remain sluggish in the near term, consistent with MBA’s forecast,” said Engelhardt.