‘Pocket listings’ could be limiting local inventory

While the number of homes for sale nationwide is showing signs of inching up, inventories still remain constrained in many housing markets across the country.

Could “pocket listings” – for-sale properties that aren’t marketed widely or posted on the MLS – be the real culprit?

“The conditions are ripe for this kind of approach to take,” Nela Richardson, chief economist at Seattle-based Redfin, told CNBC. “When there is limited inventory, an agent is able to convince a seller, because there is so much demand for housing that maybe as many eyeballs don’t need to see your home as in a traditional market.”

However, Richardson says she disagrees with the approach, and adds that Redfin agents are not permitted to do pocket listings.

“Transparency suffers when you do a pocket listing,” Richardson said. “Homes are selling very quickly, some within two weeks, so the need for a pre-listing doesn’t make sense to us.”

Instead of marketing these for-sale properties on the MLS, brokers circulate the listings among their own buyer clients or within their own brokerage. No data exists on the number of pocket listings, but anecdotally real estate professionals have been reporting a rise in recent months.

“Statistically, it appears that we are getting back to very balanced market conditions,” said Lawrence Yun, chief economist for the National Association of Realtors. “However, the sentiment out there is that we still have a shortage of inventory, and I think that is due to the prevalence of pocket listings in some markets.”