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Over the past couple of weeks, Eric Landry (home builder analyst extraordinaire at Morningstar and former trader) and I have bantered in email and over an adult beverage about this year’s housing market supply trends. Looking at the Altos-20 National Composite, housing inventory remained placid this Spring season, a trend I referenced in this weekend’s article – “The US Housing Market – On the Way Back Down?”
US Housing Supply: January 2008 - June 2009
In this last night’s email exchange, Eric pointed out that several of the hardest hit market areas showed consistently lower inventory throughout the Spring, including Orlando, Sacramento, Phoenix, and even Las Vegas. One theory is the that foreclosure moratorium kept homes off of the market, but even if that is the case, we should see some rise in inventory levels or at least a stabilization. Instead, we’re seeing steady declines throughout the Spring:
Housing Supply Trends in Key Markets through June 2009
When we examine the number of homes exiting the market (we call these “Listings Absorbed” in Altos-speak – a proxy for total weekly sales) each week over this time period, there’s no significant upward spikes or upward trends:
"Listings Absorbed" through June 2009
But, Eric’s theory is that the US housing market never saw the normal (”normal” defined as non-distressed) inflow of sellers – there were fewer listings entering the market this Spring and the numbers certainly back up this hypothesis. The thought is that non-distressed sellers simply decided not to put their home on the market because prices depressed. Unless there’s a specific motivation to put the home on the market, the would-be sellers decided just to wait out the market for another year. (”The kids will just have to share a room for another year” or “Let’s wait another year for the move-up we’ve had our eye on…”) We’re definitely seeing a downward trend in the number of new listings hitting this market throughout 2009:
Weekly New Listings through June 2009
Did the blind squirrel find a nut? Maybe the analyst guy is right – the data sure seems to back the hypothesis, and I know Eric to be a pretty smart guy. I’d sure like to hear from a few real estate agents out there to know if they’re feeling this theory play out locally.
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People might be afraid to list out of fear that they won’t qualify for a mortgage on their new home. Plus, moving can be expensive.
Inventory levels will certainly be a requirement for home price stability. The numbers you present are somewhat encouraging.
In some areas people are waiting to hear if their current jobs are moving to a new location and when, thus they wait to list their houses until they know when and where. The other issue, at least in Alaska, is that housing prices skyrocketed in the past 8-10 years, in some cases they almost doubled. This may sound good but it’s a tough spot for buyer and seller. Basically, if you sell before you see something on the market you can upgrade to or afford, you may be sitting in an apartment paying rent for awhile. In other words, sellers have a tough time becoming second time buyers in this market. Bottom line, if you can find houses comparable or the next level up, you’re either looking at a disparate range from $250,000 (low end and most likely a fixer upper) or you jump to $500,000 (huge with very high utilties which are VERY expensive) , there isn’t much in between and that limits your ability to list your house and make any kind of lateral move much less a bump up…..
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