US Housing Inventory at a Post-crisis Low
Here’s an important statistic that’s been getting a lot of attention lately in housing circles – the decline in inventory. I’ve been pretty vocal about the fact that I do not think there’s much downside in housing from here, but that I believe it would be extremely abnormal for a post-bubble turnaround to occur. Generally, these post-bubble eras end up working off excesses for a very long time. And I think this is a pertinent detail. As you’ll see below, inventory has come way down. But let’s not lose perspective. We’re only back to the 2006 levels when, by pre-crisis standards, this level would have been considered well above normal. I expect more working off to be done….Our friends at Sober Look have the details:
As discussed earlier the US housing recovery is progressing, albeit quite gradually, as the unsold inventory of homes continues to decline.
Barclays Capital: – We continue to see conditions in the existing home market as putting downward pressure on inventories and as supportive of agradual cleansing of shadow inventory. Our view is that housing is in a recovery phase, but one that will be restrained by the availability of credit, pace of improvement in labor market conditions, and overhang from distressed and foreclosed properties.
Source: Barclays Capital
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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8 Comments
What we are looking at is the collapsing availability of 30 year money.
Good news for official inventory numbers: but what about the shadow or distressed inventories? In any case, housing has indeed become more affordable (median mortgage payments after the jump)and the stabilization in residential investment is no longer a drag on economic activity – now if they only fix the rest of the economy!
JS
http://www.adsanalytics.com/dashboard/docs/dashboard.php?treepage=tree_definition_main.php&chart=chart_median_mtgpayment_income
Cullen,
What are you thoughts on this:
“The median price of an existing home jumped 9.4 percent from a year earlier, the biggest 12-month gain since January 2006, to $187,300 from $171,200 in July 2011, today’s report showed.”
That jump in prices seems rather staggering and yet it doesn’t seem to have caused much of a stir. Am I missing something? Was there a mistake in the data?
This is a pretty big deal but I have to admit a bit of confusion as to why it hasn’t been picked up by any of the other house price tracking indexes like Corelogic, FNC, Zillow, etc. Corelogic is a repeat sales index so in theory when they release their next report it should show a big jump.
http://www.corelogic.com/about-us/news/corelogic-june-home-price-index-rises-2.5-percentrepresenting-fourth-consecutive-year-over-year-increase.aspx
“CoreLogic June Home Price Index Rises 2.5 Percent—Representing Fourth Consecutive Year-Over-Year Increase
August 07, 2012, Santa Ana, Calif. –
––Pending HPI Forecasts Year-Over-Year July Increase of 2.0 Percent––
The CoreLogic Pending HPI indicates that July home prices, including distressed sales, will rise by at least 0.4 percent on a month-over-month basis from June 2012 and by 2.0 percent on a year-over-year basis from July 2011. Excluding distressed sales, July house prices are also poised to rise by 1.4 percent month-over-month from June 2012 and by 4.3 percent year-over-year from July 2011. The CoreLogic Pending HPI is a new and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes in the most recent month.”
If this number is predictive the 2% forecast above will be blown out.
I would think that the inventory could be increased, but likely more as a trickle than a flood, as the foreclosure moratorium abates and banks continue to shed properties.
For what it’s worth, I think Cullen’s perspective on a longer “work out” vs a quick “bounce back” makes perfect sense.
I’m an avid reader of the comments of Michael Olenick posted on Naked Capitalism. I’m finding his analysis the best of the bunch. This is his latest, not so far from CR considerations. Housing is many years from a recover:
http://www.nakedcapitalism.com/2012/08/michael-olenick-looking-for-a-housing-bottom.html
Looks like a home is being found for all the dollars we keep exporting.
Foreigners Snap Up Properties in the U.S. (WSJ)
Real Estate Tourism: Who’s Really Buying America’s Homes? (Forbes)
Will Foreign Real Estate Buyers Push Out Domestic Ones? (US News)
Housing is no where near bottom, homes are still ridiculously priced compared to incomes. Also, those that lock in low rates over a 30 year mortgage will suffer great price depreciation as rates rise one day, as payments will increase for any new buyers and have to compensated by lower home prices. I say another 30% once the masses realize that all paper money is debt and to expand the supply of said money means expanding the supply of debt, which there is no more capacity for. The grand experiment of debt based currency is again showing its limitations as MMT follows the logical path of zero worth. An understanding of a flawed system is all you have gained. Now you know what not to do.
So how would you suggest we hedge for that case?