January 24, 2006

OMG: Realty Times talks about inventory explosion on home page!

Once I see realtor sites (NAR, Realty Times) mentioning the truth, I figure they can't keep the truth from leaking out anymore..

The National Association of Realtors reports that in November, housing inventory – the number of homes available for sale – rose to its highest level since April 1986.

Among the cities that topped the list -- Chicago, Illinois; Binghamton, New York; and Boston, Massachusetts.

Chicago, Illinois, peaked at the top of the monthly supply survey completed by NAR. In it they found that the Chicago area had an inventory increase of a staggering 132.2 percent. It seems that everyone wanted to get on what they thought was the last stand for the sellers market. What was so worth the gamble of putting a home on the market

30 comments:

cereal said...

i dunno what the whole lake arrowhead deal is about. those are the richest of the rich, and not really a factor in the mainstream mess.

i'm surprised not to see phoenix on the list

BeanTownBubble said...

The Boston market is just getting started. Wait till spring, when the prime open house season ramps up.

"interest rates are still low (and will remain under 7 percent"

Ah care to tell me for exactly how long ...

Or are they implying they will stay below 7% forever ?

Anonymous said...

Can you respond to this comment from the article on the NAR website:

"It’s (a bubble burst) simply not in the cards. In the 37 years since NAR began tracking the price data, median home prices on a national level have never declined. "

Bake McBride said...

Beantown....
I may be one of the few that thinks interest rates may come down as the year goes on in response to the slow down...but it won't make a difference.

Too many people have leveraged themselves to the point where they have to get out quick...and it's just not going to happen because:
*Inventory way UP
*Appreciation turning to Depreciation
*More media & Financial exposure coming

2006 will be relatively calm compared to what's going to happen in 2007 & 2008

cereal said...

even if rates did nothing, things will turn. people are just way too stretched.

oil prices now look like the wild card in this whole thing. even the hint of trouble with iran for example and you saw the spike.

oil inflation eventually becomes core inflation. who's kidding who.

hey keith, how's that crap english food tasting?

Anonymous said...

My response to the 'national prices have never gone down' is actually pretty simple.

In the past - and the rhetoric you hear - job losses, usually caused by local economic issues, have been the cause for a real estate drop. Houston - Oil, SoCal - Defense, NoCAl- Dotcom.

The thing people don't seem to grasp is that the CAUSE is national this time. Asset inflation due to COUNTRYWIDE and yes WORLDWIDE lower interest rates - followed closely by creative financing and Mr. Magoo underwriting. It doesn't help that real estate job growth has jumped with that and poses an additional brick that will drop - nationwide.

THAT is why you will likely see a drop nationwide this time...it won't be as magnified in Iowa - since the prices were not run up so much to make everybody drop into an I/O Neg Am just for a starter house - but the national # will have too much downward pressure as both rates (distributed nationwide) and financing options and underwriting (used more regionally but offered nationwide) regress to the mean.

patient_in_wla said...

Does anyone have any REAL info about the following areas of Los Angeles - West LA / Mar Vista / Marina del Rey??

cereal said...

patient,

all i can tell you about the westside is anecdotal. inventory is low, prices are still high, and nothing is moving. i watch the same old open houses week in and week out here in culver city.

it's not our time yet. maybe it's different here.

Anonymous said...

I have a friend who writes for Realty Times. I recall reading one of his articles on the bubble one or two years ago when no one was watching.
It's a good paper, don't bash it on one read.

41cadillac said...

Los Angeles: I watch the 90004 Hancock Park zip code. Five homes have caught my attention. Three been on the market 2 years. Two have been on the market 6 months. These are estate homes. One is no longer on the multiple listing, however a drive by show the for sale sign.

Don't see a bust yet. This easy money will dry up. Change is absolutely inevitable. Don't the philosophy people say change is the only constant.

Anonymous said...

National Association of Realtors POOPS in this Blog's punchbowl! OR ARE THEY TROLLS!

Taking Inventory
by Kevin Thorpe & Wannasiri Chompoopet

In November, housing inventory – the number of homes available for sale – rose to its highest level since April 1986. Once again, the Chicken Littles came out of the henhouse shouting the “sky is falling”. They suggest that, with mortgage rates rising and demand slowing, a rise in inventory will inevitably cause home prices to crash. Yet, NAR reported that in November existing-home sales posted a 6.97 million unit seasonally adjusted annualized sales rate – a higher sales rate than the record home sales last year. And home prices surged 13.2%. The months’ supply of homes – a much more relevant indicator of inventory conditions because it factors in the sales rate – was at 5 months. That means that there is a 5-month supply of existing homes available for sale at the current sales rate. That is still a very lean market. Generally, a 6-month supply of homes is indicative of a “balanced” market.”

No Helmet Required
Well, for those waiting for the crash, you can leave your protective headgear behind. Home prices are not going to crash. It’s simply not in the cards. In the 37 years since NAR began tracking the price data, median home prices on a national level have never declined. Even in April 1986, when inventory was 3.04 million units and the months’ supply was 10.3, home prices did not decline. In fact, they rose 7.2% that month and 6.4% for the entire year of 1986.The latest figures indicate that with the months’ supply at 5, that is half of what it was in April 1986.



There are other reasons why prices won’t crash. One of them is demand. Demand for homes is double what it was in 1986. Another reason: fundamentals. The U.S. economy is fundamentally sound – jobs are being created, interest rates are still low (and will remain under 7 percent, mortgage credit is readily available, and homeownership has proven itself as a viable investment alternative to stocks and bonds. Since 2000, there have been $4 trillion dollars in home equity gains. That is equivalent to $70,000 per household, an exceptional return on investment. For most homeowners, their home has an additional benefit – it provides shelter for them and their families.

Some Changes Ahead
The housing market is going through a transition, shifting from a hot sellers market, as it has been for several years now, to a more-balanced market. At the national level, we can see that home sales are slowing, the month-supply is rising, and as a result, balance is returning to the market. As a result, we do expect home prices to soften in the coming months. And slowing sales are good for the long-term health of the housing sector. So we should welcome a moderate slowdown, not panic from it.

Regional and Local Trends
Real estate is a local business, so NAR Research looked at some regional and local data. Specifically, we examined month-supply and home price data for 80 selected markets across the country. We looked at the most recent data available (third quarter 2005). From the data, we can see the trends that we observed at the national level also hold true at the local level. That is, the month-supply is rising in most markets, but overall, inventory is still quite lean. Of the 80 markets studied, 75 had a month-supply under 6.0. The other five were either at 6.0 or slightly above. This means that the majority of markets are still lean.

It is also useful to look at the top 10 markets by increase in month-supply from the third quarter of 2004 to the third quarter of 2005. These would be the markets that some might consider as
potential “red flags” because of the run-up in inventory. But the data does not support that notion whatsoever. In fact, all of these markets posted healthy price gains in 2005Q3; indeed, more than half of them experienced double-digit gains. Moreover, despite the rises in inventory, the month-supply in these markets is still extremely lean (below 6.0 in all cases).



Forty-six of the 80 markets we examined experienced an increase in month-supply of homes in the third quarter of 2005. Interestingly, 33 markets actually saw a decrease in month-supply. Even then, in the vast majority of these markets home prices continued to rise, while only three had slight price declines – Kankakee-Bradley IL (-0.3%), Pittsfield MA (-0.1%), and Topeka KS (-1.3%). Clearly, the declines were negligible, and could simply be explained by quarter-to-quarter sample volatility.

Don't Panic
So, even though inventory may rise, home prices are not necessarily headed for a downturn. It is true that price appreciation may slow due to a softening of demand because of higher interest rates. But there will still be buyers out there. The good news is that there will be an available supply of homes for them to purchase.


Keith: A you just a wishful thinker?

Grinch34 said...

"The U.S. economy is fundamentally sound – jobs are being created"

Like I said on a previous comment, brain-washed is the term that is happening here not trolls or dolts.

mtnrunner2 said...

Anonymous- thanks for posting the NAR essay. I saw the slowdown in San Diego starting in the last quarter of 2005. The NAR essay is based on data through Q3 2005, while sales were still strong. I would like to read their essay in the spring, concluding with March 2006, now that the corner has turned. Furthermore, national trends could still be upward. The strongest declines are in the markets that took off first, like San Diego. SD has a -4% change in list price from Oct 2005 to Jan 2006, according to the MLS. Phoenix median sales price is down 5% in that same time period. The downturn has started. It will take time to be reflected in the 3-6 month lagging reports of the NAR.

The Thinker said...

Well what do you expect NAR to say? They do not want to contribute to a panic that can devastate their industry. I for one am surprised they are admitting a slowdown.

keith said...

GM announces 30,000 layoffs
Ford announced 25,000 layoffs

a few ?'s come to mind:

1) how much will that blow for housing in those cities
2) too bad the NAR can't announce layoffs - I'd guess 1 Million realtors would be a start

also, in response to:
"hey keith, how's that crap english food tasting?"

the answer is you wouldn't know if you were in england, 'cause so far I've had excellent thai, indian, french and italian food. Oh, sausages are good for breakfast, I'll give the english that

cheers

Robert Coté said...

Keith B.,

Has it occured to you that the entire driving force of the British Empire revolved around the desperate need to find something good for lunch? Heck, WW-II could be reduced to the Third reich saying "sauerbratten again?" "Let's go see what's on the menu in Paris."

cereal said...

cuz when it's time to eat, let the french do the cooking. but if i'm in a streetfight, i hope my partner is british.

Anonymous said...

That quote from NAR on how the "fundamentals" of the housing market indicate that housing prices must continue to rise is a real cough-up-your-coffee howler.

I'll probably be virtually-betting him at some point this year via the bond market on his statement that interest rates will remain below 7%. I think that we'll see at least another percent on any kind of loan before the year is out.

When he repeats that "nationally, median housing prices have never declined", is that a YOY figure? We certainly have seen it in at least a couple of months in 2005.

Anonymous said...

"In heaven, the French are the cooks, the Germans are the engineers, and the British are the police.

"In hell, the British are the cooks, the French are the engineers, and the Germans are the police."

Dave said...

In my neighborhood (Ventura County, CA) inventory is growing rapidly. I now see open houses on most days of the week and I just saw an ad for one realtor who isn't having the traditional open house, but six properties with viewing times of 10 minutes in a neighborhood. I suppose sitting at one open house when he has so many listings isn't really fruitful. If buyers (and I can't really imagine who they would be at this point) are in a mood to believe absurd statements like "rates will stay below 7%" they are LESS likely to move quickly as they become aware of the rising inventory and softening prices.

277.18 Hz said...

Can you respond to this comment from the article on the NAR website:

"It’s (a bubble burst) simply not in the cards. In the 37 years since NAR began tracking the price data, median home prices on a national level have never declined. "


HEY ANONYMOUS,

Just because something hasn't happened in 37 years, doesn't mean it will never happen.

In fact, IT JUST DID.

U.S. Median Sales Price
Dec '04 $229,600
Aug $240,100
Sep $240,400
Oct $237,500
Nov $226,800
Dec '05 $221,800

Is that a satisfactory response?

Grinch34 said...

Xicote said


Thanks for the info.

Greg said...

self help books what about it..self help books

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