Negative Equity Impacts Home Supply Positively

According to CoreLogic, negative home equity is actually driving a drop in REO properties and the overall supply of unsold properties. The result is an increase in home prices. The home supply is at the lowest number in more than five years – sitting at six and a half months.

Negative equity makes people more reluctant to put their homes on the market, leading to a lower supply. It also makes buyers more hesitant. The 50 largest housing markets in the country have a corresponding low inventory of available homes. Ironically, the greater number of negative equity homes is actually keeping the market afloat by keeping supplies low. This results in higher home prices for those that are on the market due to lower demand.

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