So far this year, home sales volume is about 10% higher than 2014.
Today’s Pending Home Sales release from NAR is starting to show the moderately healthy housing demand we’ve been talking about for the past few months.
Altos Research had already anticipated this trend because of strength in weekly readings of our proprietary Estimated Sales number (which takes into account failed deals and other churn in the active market).
You can see the trough of sales volume each January 1 (red line). Recall from the previous few posts, that inventory is still low, and 2015 will be a supply-constrained market yet again. The yellow line below is the smoothed 90-day rolling average which will start climbing in March on the spring schedule.
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Pending Home Sales as predicted by Altos Research Estimated Sales metric. Single Family Homes. Altos 20-City National Composite
Despite today’s low numbers reported by NAR for the quantity of homes sold in January, the time to sell the existing housing stock is generally quite low.
Here’s a quick look at the amount of time it takes to sell a house in Los Angeles – currently about 60 days. Days on market (DOM) is an important measure when trying to understand how much demand there is from buyers. According to Altos Research data, homes in LA are now spending even less time on the market than in the past few years, which were already pretty strong.
This evident demand stands in contrast to January’s existing home sales number. It implies that the sales volume in January is more a function of supply than demand. There may be evidence that some demand is shelved until conditions change. That bodes well for prices, if not for total sales count.
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It’s mid-February and we have very little new inventory coming on the market. This is good news if you’re thinking about selling your home. And a signal that prices will continue to rise through the year.
Typically, a seasonal flood of new listings start coming on the market after the new year. By mid-February, we can see how fast the waters are rising. This chart shows that 2015 will emerge like the last two seasons with just a trickle of new inventory hitting the market.
Single Family Homes for sale across the 20 cities in the Altos Research 20-City Composite.
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Yesterday, the National Association of Realtors released it’s monthly survey of REALTOR confidence, which I noticed in this tweet:
Realtors are more confident. But what do they know, right?! Does Realtor confidence tell us anything about the future?
It turns out, Realtor confidence is remarkably predictive about the housing market. When I give talks, I cite this as a marvelous example of Wisdom of the Crowd. Individually a given real estate agent may be wildly optimistic or pessimistic. But taken together, these professionals know exactly where the market is heading. An agent is optimistic when she sees demand. Demand leads to higher home prices. Look at this remarkable correlation.
NAR Realtor Confidence Index vs. Altos Research 20 City Composite Price. Both Series for Single Family Homes. Y-axis not zero-scaled
January 2011 was the absolute trough of the housing bust. However, REALTORS noticed a slight change a few months prior and expressed this in their 6 month outlook. If you’ll remember back to that time, this change in optimism is especially notable. In Q1 2011, the housing headlines were calling for Armageddon. The tax credit expired in April, 2010 and housing demand evaporated for the rest of the year. Prices were weak. The lagging data that feeds the headlines was still negative well into 2011.
But REALTORS in general don’t rely on the headlines. They respond to whether the phone is ringing. And in January, 2011, the phone started ringing – just a little bit more. Prices followed. Then in early 2012 and again in 2013, the Realtors really felt the surge. Home prices rocketed forward. Striking stuff.
Where does that leave us for 2015? January is off to a strong optimistic start. Pay attention.