From Michael Orr’s Cromford Report

This is too great not to share:

A very misleading view of the US housing market has been written recently by Heidi Moore of the Guardian, and given prominent publicity by Yahoo as if it were a serious analysis. It is based on several flawed assumptions and therefore arrives at incorrect conclusions . You can find the original article here. Among the many false assumptions in the piece are the following two:

1. “Lenders are controlling the housing supply by reducing the number of houses for sale”.

Like any original researcher worth their salt, we actually count the number of homes owned by lenders in Greater Phoenix. We know the total of unlisted single family REOs in Greater Phoenix is 1,778 as of June 1, 2013. This number is insignificant relative to the size of our market, where some 75,000 single family homes are sold through ARMLS each year.. You can download a spreadsheet of the REOs here to see for yourself (the spreadsheet also includes the REOs listed on ARMLS) and you can examine the unlisted REO inventory by ZIP code here. The idea that 90% of REOs are held off the market artificially is completely untrue and in fact there are so few REOs in total (3,749) that it would make little difference to the supply if they were all dumped on the market at once. This however is not going to happen.

2. “House-flippers are driving up prices

In fact house flips in Greater Phoenix have fallen to their lowest levels in many years. In April 2013 there were 368 single family home flips in Maricopa County, down 58% from April 2012 when there were 875. In April 2011 there were 882. The market is now dominated by normal sales transactions between normal home owners and normal home buyers. Investor transactions, though still high by normal standards, have been on a downward trend since July 2012. The vast majority of investor transactions are not flips but purchases with cash to create rental homes.

The idea that the housing recovery is somehow “dubious”, “false” and based on far-fetched conspiracies between government and lenders is plain silly, at least as it applies to Greater Phoenix. We suspect that the same is true elsewhere, but we don’t keep the detailed data for counties other than Maricopa and Pinal, so we make no claims about other markets. However if Heidi were to actually try to buy a home in Phoenix she would be shocked by how different the real world is from the one she imagines.

The real situation is much simpler. We don’t have enough homes on the market to meet demand, and there is no significant source of new supply. Hence prices rise. There is nothing fake about that.