How many homeowners have been sitting on the sidelines during the housing downturn, waiting for massive price plunges to pass?…“What’s going to happen to the household that wanted to move three years ago and didn’t want to sell into a declining market?” says Michael Fratantoni, an economist at the Mortgage Bankers Association. “There’s a lot of those folks out there, and once we start getting a couple months of good news, there’s going to be a flood of listings from these people.”…many of these sidelined sellers continue to cling to unrealistic views about how much their homes are worth. It’s bound to become an issue in all neighborhoods as more mid-to-high end homes go into foreclosure or attempt a short sale, setting prices at a lower level.

The prospect of home-price stabilization is raising that question in some of the nation’s housing markets, say real-estate agents, who report an uptick in listings from “sidelined” sellers testing the waters.Over the past year, there’s been plenty of speculation about if and when banks will begin to list more foreclosed homes for sale. But these sidelined sellers represent another potential source of “shadow” inventory.“The number of people coming back on the market as sellers is moving up,” says Pat Lashinsky, chief executive of real-estate brokerage ZipRealty, Inc. At the same time, “buyers are looking, but they’re not buying,” he says. The inventories of unsold homes increased in June, according to the National Association of Realtors, to 8.9 months of supply at the current sales rate, up from 8.3 in May.
By Nick Timiraos, July 27, 2010 WSJ

Link to article