Crunching some numbers while writing an article for McCormick Ranch Lifestyle magazine, I just put 2 and 2 together.

Underwater Phoenix homeowners lower the potential supply of Phoenix homes for sale. (And lower supply tends to mean higher prices.)

These underwater homeowners I’m thinking of don’t want to do a short sale because they aren’t that far under water but they don’t want to have to pay tens of thousands of dollars to their mortgage company if they were to sell their home. So they stay put even though they would sell if they had equity.

Sure, obviously, absolutely, the increased supply of foreclosures and short sales have dwarfed the reduced supply due to underwater-and-can’t-sell homes but what happens as foreclosures and short sales decline?

As the number of Phoenix foreclosures and short sales declines, the supply of Phoenix homes could tighten up more quickly than I was expecting.

We may not need to get back to a “normal” (2000, 2001, 2002) level of home sales each month to have a balanced market.