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What Can Be Done Now That US Housing Inventory Remains Scarce

Posted by Nicole Abasta on Feb 29, 2016 07:37 AM EST
For Sale Signs Multiply With Weakening Housing Market more big
CHESAPEAKE BEACH, MD - APRIL 03: For sale signs stand on a medium strip in a housing development April 3, 2007 in Chesapeake Beach, Maryland. Although the U.S. stock market rose sharply today, due in part to the announcement better pending sales of previously owned homes in February, sales are still down when compared to the numbers from 2006. (Photo : Mark Wilson/Getty Images)

Despite recent news reporting a recovery seen in the U.S. housing supplies with sales and prices increase, inventory remains limited.

As BusinessWire reported, data from Fitch Ratings showed that existing homes inventory dropped 12.3 percent in December 2015 at 1.79 million units compared to the previous month, and was down 3.8 percent year-on-year. On the other hand, new homes supplies were up by 2.6 percent with 231,000 units from 217,000 units in November, and up by 11.8 percent compared to the previous year.

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According to Forbes, the shortage in housing inventory in the country can be attributed to factors already observed since 2013. These include underwater mortgages, affordability issues and mortgage financing difficulties. Some people also do not want to sell their homes due to limited equity and they can't yet afford a move-up.

This trend looks set to remain and affect housing market activities. But Forbes suggested some things people can do to kick start the market, especially with spring season coming.

For one, Forbes recommended to allow homeowner to make a short sale when his mortgage is underwater and his payments are current. After which, the homeowner should be immediately allowed to apply for a mortgage financing for a new home instead of having him to wait three to four years. The publication said Fannie Mae and Freddie Mac could make a simple underwriting guideline to fix the underwater or little to no equity concern.

Reducing the monthly mortgage insurance premiums will also make it more affordable for buyers to acquire a new home for move-up. It will also enable first-time buyers with limited down payment to finally own a home, Forbes said.

Lastly, the publication said there should be level playing field where anyone can participate and be competitive, regardless of whether they have a home to sell or not.

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