Wednesday, December 21, 2011

Housing update



There were large revisions to the past few years' data on existing home sales, but the net result was a substantial reduction in the inventory of homes for sale. (See today's excellent posts on Calculated Risk for a detailed discussion of this.) The current inventory is now back down to levels last seen in 2005, and that brightens the outlook for the housing sector. Even the shadow inventory of homes (those with serious delinquencies and very likely to be foreclosed and sold) has declined, though it remains substantial. And even though the current sales rate is still far below what we saw in the heydays of the housing boom, the month's supply of inventory (second chart above) is now substantially lower than the levels that prevailed throughout the 1980s, and that, in turn, diminishes the threat of the shadow inventory.

In sum, the housing market has undergone a gigantic and very painful adjustment, but the market is clearing, and the overhang of unsold homes now is on a par with what we have seen before and survived. Moreover, financing costs are at record-low levels, and the economy continues to grow and incomes continue to rise. Therefore I don't think it is likely that the existing and shadow inventory of homes for sale implies a further wrenching adjustment. I continue to believe that we have seen the worst for the housing market.

9 comments:

Hans said...

I wish there was other data points, rather than the NRA, who has much in common with RIAA and the MPAA..

Benjamin said...

Scott Grannis has mounted a convincing case.

My guess is that next year, with 4 percent mortgages, we start to see some real action in housing.

Mustering downpayment is still tough for many. Hopefully people will find a way, and once they do they can live more cheaply than ever before (due to record-high affordability).

Such homeowners will have more disposable income than ever before.

If the Fed will just goose this economy somewhat....

Hans said...

Ben Jamin, I think the only case, Mr Grannis, has made is that we have reached the nadir..

Dr William J McKibbin said...

The still expanding Main Street depression is creating buy opportunities all across America -- my guess is that high quality rent-earning real estate and dividend-paying stocks will be snapped up quickly by those with cash, including investors from overseas -- America is "on sale" and cash buyers are now eagerly sought by sellers (i.e., too many goods chasing too little cash, which is the macroeconomic formula for deflation and depression) -- those with world-class skills to sell (e.g., physicians, engineers, and entertainers) and/or significant rent and dividend income will be the new lords of America -- everyone else (especially those who live on fixed incomes, government salaries and entitlements, or earn wages for other than world-class skills) are in for hard times...

Unknown said...

"In sum, the housing market has undergone a gigantic and very painful adjustment, but the market is clearing, and the overhang of unsold homes now is on a par with what we have seen before and survived."

Scott - how can you acknowledge the specter of a shadow inventory in the previous paragraph and then make the claim above that overhang of unsold homes is on par with what we have seen before. I think you are very much underestimating the amount of shadow inventory. There are very few equity sellers around these parts right now - entire markets are being driven by distressed homes. It is an artificial inventory and not a healthy market by any means.

Orange county median home prices have dropped 8-10% YoY for Nov. - the drop in prices has been accelerating in the past few months not stabilizing. BofA has finally turned on the foreclosure spigot. We have a long way to go in California. I wouldn't think of buying for a couple more years.

I recommend reading ochousingnews.com for good analysis of OC and Southern California's housing market.

randy said...

Things clearly better in Texas:

Sales of existing homes in the Central Texas region rose about 11 percent in November, and the area's median home price was up 3 percent compared with the same month last year, the Austin Board of Realtors said Tuesday.

"For the sixth month in a row, the volume of home sales in Austin has outpaced 2010, and the inventory of available homes has decreased," said Judith Bundschuh, the board's chairwoman. "The home that's priced correctly (that) you look at today will not be there tomorrow."

Hans said...

Hear is more concern about the about the NRA's numbers..

http://globaleconomicanalysis.blogspot.com/2011/12/investigating-nars-seemingly.html

Hans said...

Core Logic's shadow inventory chart...

http://dailycapitalist.com/2011/12/21/more-real-estate-shadow-inventory-home-sales/#respond

housesearch123 said...

Amazing how simple it can be to communicate with people and have them understand a certain topic, you made my day.
Orange county homes