Written By: Samantha Guarderas

2012 had the highest annual total of home sales since 2007. Sales increased 9% in 2012 to a total of 4.65 million units. However, according to WSJ, “Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains.” So why has inventory continued to drop this year?

A large number of homeowners, approximately 10 million, owe more on their mortgage than their homes are worth. It is not probable that these homeowners will sell unless financial issues come up, or they need to move due to life changes. Also, many homeowners have always counted on home equity for the down payment on their next home. However, an additional 10 million homeowners can’t upgrade to their next house because they have less than 20% equity on the current home that they own. Since they are unable to advance to a more costly home, they have contributed to drag on the inventory available.

Another major contribution to the drop in inventory this year is that few people are willing to sell because they feel that their home values are going to increase over the course of 2013 and ahead. Many people feel that if they sell today, they’ll lose out on the potential uptick in value that their houses might gain within the next year, prompting them to stall them from listing the house on the market. This reluctance is linked to the inventory decline. In addition, investors have been taking a different approach, including buying homes that they choose to rent out instead of reselling for fast profits. Therefore, these homes are not a part of the for-sale unit because they are instead being leased out until the market values increase drastically to justify the re-sale of these investment homes.

Helping to combat the inventory problem is new construction, which provides new units to the market place. 811 19th Street just hit the market last week with 5 new units. 3 of them are available. Unit is listed by Phillip Braunstein.