Salient to Investors:

A plunge in US home listings to a 12-year low is driving up prices and many potential sellers are holding off until values rise more, while investors snatch up distressed properties before they reach the market. Builders can’t increase production fast enough. One home in Washington attracted 168 offers in December and sold for almost twice the asking price.

NAR said existing home sales fell to a 4.94 million annual rate in December versus a normal level of 5 million to 5.5 million transactions.

Mark Zandi at Moody’s Analytics said inventories may remain tight for a year or two because prices need to rise another 5 or 10 percent before enough sellers can cover mortgage and transaction costs.

Tim Ellis at Redfin said much of the drop-off in listings is tied to fewer foreclosure deals and short sales. Redfin said a third of homeowners say their biggest concern about selling now is that they will miss out on future price gains, their top worry. Redfin said new listings in 21 of the largest US cities fell 21 percent in January from a year earlier: declines of over 35 percent in the San FranciscoBay area, Las Vegas and Atlanta.

At the end of 2012, 28 percent of US home listings were under contract within 14 days: Silicon Valley and Los Angeles areas exceeded 40 percent, Washington, Seattle and Denver exceeded 30 percent.

Jed Kolko at Trulia said the logjam will continue into the spring as the appetite for real estate increases: inventories start growing in February and peak in July.

Brad Hunter at Metrostudy said builders can’t increase production fast enough because of labor shortages and rising competition for lots in the best locations

Daren Blomquist at RealtyTrac said distressed listings may increase in 2013 because foreclosure filings began picking up in 2012, especially in states that require court approval for repossessions – it takes 600 days, on average, from the time a property enters the foreclosure process until a bank sells it.

Private-equity firms began purchasing thousands of foreclosed homes in 2012.  Thomas Lawler said the incredible emergence of big money is a significant reason for less supply.

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