Inventory Slides Sharply, Shortage this summer?
Pendings Rise; New listing activity trending lower.
April to be a good month, but probably lags March
Pending: 14,023 ( + 269 from last week)
Pending Sfam: 12,023 ( + 245 from last week)
AWC: 7,544 ( +128 from last week)
AWC Sfam: 6,498 ( +131 from last week)
Active: 28,428 ( -945 from last week)
Active Sfam: 22,853 (-809 from last week)
Closed 4/11-4/17 2,110 ( +490 from last week)
Closed Sfam: 1,775 ( +442 from last week)
Closed through 4/17: 4,189
Closed Sfam: 3,487
New listings April: 6371 (April of 2010: 14,078)
Inventory continues to be the story as it has now fallen precipitously into less than three months worth at current sales activity. Inventory dropped 3.15 percent just in the last week! To be at only 28,000 listings going into the heart of the selling season, at a time when there is little in the way of new standing inventory, would lead you to believe, under normal circumstances, that we could be looking at a shortage this summer. While I do think that is a possibility, we must reserve some caution for the idea that the banks and everyone else says there is still substantial bank inventory waiting in the wings. Of course, the idea of Lender owned properties has always been overstated. Even now, with our massively reduced inventory, Lender owned homes make up a small proportion of listings. Of the 28,428 active listings recorded by me this morning, only 4,986 were lender owned. Lender owned properties have a lot to do with moving price, but they have relative little to do with overall inventory, at least at this point. Short Sale inventory has a higher impact on inventory right now than lender owned properties do. (There are 6,683 of those.)
As far as the overall inventory, lets take a quick look back in time to April 20, 2008. Inventory levels were at 55,587. There were 7,067 pending contracts. There were 2,480 closings as of that day. 4,880 homes ultimately closed that April. Lets not forget that there were probably still 45K-55K new homes also available at that time. The statistic I heard a week or so ago was just 8,000 are now available. Look at those statistics compared to today. Half the inventory; twice the sales and pending numbers; relatively few new housing purchase opportunities. These are all things that point to a rebound in prices. It should not be downplayed that there is excessive bank inventory, but it certainly seems the bank inventory is being balanced by fewer traditional listings.
While March and April are traditionally heavy listing months, May typically slows down, and we continue to burn through inventory through the rest of the summer. It will be interesting to look at statistics on June 1st, and see where the inventory levels are. At this trend line, in both sales, and inventory reductions, price levels are unsustainable, and will go up.
It is worth noting that we had a an after-June swoon last year from which we didn't really recover; inventory continued to build and sales lagged throughout the summer. It was thought this was the effect of the home purchase tax credit ending in the spring, but we could look at the economy in general and the poor employment, as well as the election year politics as to why sales were pummeled, which precipitated the substantial fall in home prices we experienced. By December of 2010, which is normally a poor sales month, things had turned a bit, and December turned in one of the best performances of the whole year. It led right into a strong beginning for 2011, and we really have had no poor trends to speak of since. Prices have not returned yet, but have stabilized; as inventory falls closer and closer to dangerous 2005 levels, we can see that pricing may not take long to climb as well. None of us should want a return to 2005, and we won't see that right now. But we could see what is likely to be truth: there was an over-correction in pricing, and very possibly it will shortly swing the other way.
Pending sales do continue to climb, but I think we may plateau in the 14,000's. That seems to be short term cap. It would be great to see a breakout into the 15,000, but the economy does not support that right now, nor the job market. Still, if it stays in the 13,000-14,000 range through the summer, we will probably get 8000--9000 sales per month, and given current listing trends, it should be enough to sustain a modest housing recovery.
We do seem to be lagging the sales of March a bit; that could simply be a matter of timing, as we have had a lot of weekends already in April, but March may prove a difficult month to duplicate. We are likely to end up in the 9000's, but I think 10,000 sales in April may be asking for too much. Anything over 9000 is still an excellent month. Given the shock of oil prices since February, that would still be a very good month. Inventory continues to be key, however- the news media locally here won't talk about improved housing numbers until people complain about pricing. They may not have long to wait.
chris
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