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Continued: US housing recovery is facing an obstacle: Not enough homes are for sale

  • Article by: SCOTT MAYEROWITZ , Associated Press
  • Last update: May 1, 2013 - 1:36 PM

"People have been wanting to move for a very long time," says Glenn Kelman, CEO of online real estate broker Redfin. "Somebody rang a bell and said the boom is back, and nobody wants to be late to the party."

The market in Grand Rapids is more subdued but still driven by a supply shortage.

The Bells recently toured a 142-year-old home. Calling it a "fixer-up project" would be generous. Floors drooped. Doorways tilted. The master bathroom had a comically low ceiling. The only thing working in the living room was a mouse trap.

It was the only affordable house for sale in the small historic Heritage Hill neighborhood the Bells love. Within walking distance are shops and a church converted to a brewery. Restaurants are packed on weeknights with young professionals snacking on bacon cheddar meatballs, polenta fries and chicken fried livers.

The only thing harder than finding a seat at the bar during happy hour is finding a home for sale nearby.

Nationally, there were just 1.93 million homes on the market in March, down 16.8 percent from the prior year, according to the National Association of Realtors. In a healthy market, there's roughly a six month supply. This March, that number had fallen to 4.7 months — a situation stacked against buyers.

As more would-be buyers bid on fewer properties, prices are being forced up at a rate that might be overstating the market's health. Prices in the top 20 cities have risen 9.3 percent in the past year, according to the S&P/Case-Shiller home price index. That's the fastest year-over-year increase since May 2006.

Homes now sit on the market for just 62 days, down from a median of 91 days last year. Would-be buyers who like a home are being urged to act fast.

The tight supply is a key reason that Susan Wachter, a real estate and finance professor at the University of Pennsylvania's Wharton School, estimates a full recovery is still three to five years away. Even so, Wachter calls this "a breakout spring." The public now recognizes, she says, that the housing recovery will last.

The Bells have already lost out on one house they liked.

"We wanted a day to think about it," says Beth Heinen Bell, 32, a communications coordinator for a writing festival. "We left the house, and our agent got a call that there was an offer in."

Diane Griffin, CEO of Griffin Properties, which has been helping the Bells search for a home, says a major problem is that many potential sellers aren't being realistic about price. She often has to explain that their property isn't worth what it was during the boom.

"This is the most difficult conversation I have with people," she says. "I have it multiple times a day."

Prices here bottomed in October 2011, after falling 24.5 percent during the prior 5 1/2 years. They have since risen 7.6 percent, to a median of $114,400, giving many buyers enough confidence to come into the market. Yet even so, home values remain 17.2 percent below the peak, according to Zillow. If prices continue to rise, they will eventually help more sellers come off the sidelines.

Maureen and Bruce Hart are one of those couples who aren't ready to sell.

They've been in their house in East Grand Rapids since July 1990. Their two grown kids have moved out. Moving into a smaller home — with a smaller mortgage — makes sense. Yet the couple just spent more than $100,000 on renovations. There's a new kitchen, new roof, new bathroom, new windows and the addition of a porch.

"We really thought we were going to stay," says Maureen Hart. Then a house down the road sold for nearly half a million dollars. "That was a real eye-opener."

A real estate agent suggested listing the home, in a suburban neighborhood with packs of after-work joggers and cyclists, for $393,000. The Harts feel it's a good price. Still, they hesitate because they wouldn't recoup the money they spent on renovations.

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