Real Estate Market not following the Formula

Strong buyer's market + low supply of homes for sale = Higher Prices, right??

Yet home prices are not cooperating with the formula, falling again in March. Prices usually rise as supply shrinks. So why this happening?

A few reasons according to CNBC's Diana Olick
  • “With nearly half of the market being distressed, we’re a long way from a return to a normal market,” said Thomas Popik, research director at Campbell Surveys. “Agents responding to our survey say that homeowners with well-maintained properties in good locations are very reluctant to list at today’s prices. That’s why inventory is low—and also why forced REO and short sales are such a big proportion of the remaining market.”
  • Short sales have been ramping up of late, as banks attempt to comply with the so-called “robo-signing” mortgage settlement. Those are part of the losses the banks are required to take in the $25 billion deal. Over the past six months, short sales have moved from 17.8 percent of all sales to 19.9 percent, according to the Campbell/IMF survey. They now represent the number one segment for distressed properties.

Full Article  - Short Sales Higher, Prices Lower - CNBC: "Short Sales Higher, Prices Lower"