Expert: Buyers the first step to recovery

A financial expert said that more Americans need to be convinced that moving into a new home now is a good idea in order for the housing market to stabilize.

Irwin Kellner, chief economist for MarketWatch, wrote for the website that the real estate market is caught in a catch-22 situation, where declining home prices and homebuyer demand match up in a battle of wills. Though lower prices would seem to encourage more buyers to consider moving into a new home, recent home sales reports have shown that few are stepping up to the plate.

The culprit, wrote Kellner, may be that buyers are still betting on further home price declines, as foreclosures continue to rise and the nation's housing supply grows by the week.

"Today's home-buying environment differs in one critical respect from the past: It is rife with excess inventories and foreclosures, meaning a surfeit of supplies," wrote Kellner. "That said, you can't blame buyers for expecting prices to fall."

Further complicating matters is the fact that the nation's shadow inventory - homes that have been repossessed by banks but not yet on the market - is steadily rising and threatening to unleash another wave of distressed homes onto the housing supply. Fitch Ratings predicts that it would take at least 40 months for the country to deplete its 7-million home shadow inventory.
 

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