Inventory and Sales Almost Equal, Is This The Bottom?
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Look at this chart from Calculated Risk carefully. If you need to see a bigger version, click on it or here.
This is the scary part. It looks like we may hit a point where the inventory of homes for sale in the country will exceed the sales for the year.
I wonder if that will the tipping point when new buyers come back into the market and sellers really make the deals that will move homes.
Of course, once that happens the chart will quickly invert as homes will come off the market and sales will increase.
If you look at the last terrible real estate market from 1978 to 1982 home sames and inventory were almost equal and then sales took off.
Lets hope it happens again.
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Comment by Rational expectations on 24 May 2008:
This is voodoo real estate forecasting. In the stock market, technical analysts use key thresholds because they believe that individuals will que on price, or because these have been thresholds in the (recent) past and everyone knows that they have been thresholds.
The analogy here is just not right. Supply is not price. One thing we CAN say is that, as supply increases, there will be (continued) downward pressure on house prices (which of course is good for buyers and bad for sellers, builders, and realtors). EVENTUALLY this should result in a pickup in sales, but there is no special magic to the 12 month figure, other than it is very bad. Can you imagine the typical buyer queing on 12 months supply? I doubt that many will even know. They WILL know when prices come down. That is the que.
While we are on the subject, bear in mind that BOTH demand and supply are pent up right now. Buyers are holding off, but so are many sellers. When volume starts to head up again, median prices will continue to drop, and likely we will see months of supply go up and down several times in the coming 2-3 years. Fasten your seatbelts. This is going to be a bumpy (and very long) ride!
Comment by Kirk on 24 May 2008:
The boom of the past five years was way beyond the boom that led to the 80s bust. Plus, the 80s bust was more localized in the California, New York, New England area. This one was much wider spread.
Also, if rates rise like they did in the early 80s, we will really see pain in the real estate market. Houses are unaffordable at historically low rates. Just imagine what happens at 7 or 8 percent.