Lengthy Time on Market Remains an Issue for Short Sales

By Oscar Wei, senior research analyst

The supply of housing continued to decline at the state level, with an unsold inventory index (UII) of 4.2 months for December 2011, a drop from 5 months in both the previous month and the same month of the previous year.  In fact, it was the lowest level since December 2009 when the UII was below 4 months.  Inventory levels, however, varied considerably across different segments of the market.

Inventory of short sales remained at a relatively high level primarily because many of these properties continued to stay on the market much longer than equity sales and Real Estate Owned (REO) sales. In December, an equity sale typically stayed on the market for 56 days; an REO remained on the market for 41 days, but a short sale property stayed on the market for 116 days. Short sales were on the market for a much longer time frame due to the additional time needed for lenders to approve a short sale offer. Until the short sale process is streamlined and standardized, the inventory level for short sales will likely remain higher than those of REOs and equity sales in the foreseeable future.

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