Housing: What if inventory keeps falling?
by Bill McBride on 2/22/2013 01:00:00 PM
Just thinking out loud ... one of my ten economic questions for 2013 was: Will Housing inventory bottom in 2013?. My guess was active inventory would bottom in 2013, "probably in January". At the least, I expected that the rate of year-over-year decline would "slow sharply".
This could still be correct. The NAR reported yesterday that listed inventory fell to 1.74 million units in January, the lowest level since December 1999. This was down 25.3 percent from January 2012.
Note: Inventory will increase seasonally over the next few months (this happens every year), and this is why I'm tracking the weekly inventory data.
Click on graph for larger image.
This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.
Look at that year-over-year decline (blue line). Inventory has been falling sharply on a year-over-year basis for some time. With the low level of inventory, both in absolute numbers and as a month-of-supply, and the recent price increases in some areas, it would some likely more inventory would come on the market.
But what if this is incorrect? Just imagine if inventory falls another 25% by January 2014. That would be the lowest level of inventory in decades. At the current sales rate, the months-of-supply would fall to 3.2 months. I just don't see that happening. So, it seems likely that at least the rate of inventory decline will slow.
This could still be correct. The NAR reported yesterday that listed inventory fell to 1.74 million units in January, the lowest level since December 1999. This was down 25.3 percent from January 2012.
Note: Inventory will increase seasonally over the next few months (this happens every year), and this is why I'm tracking the weekly inventory data.
Click on graph for larger image.This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.
Look at that year-over-year decline (blue line). Inventory has been falling sharply on a year-over-year basis for some time. With the low level of inventory, both in absolute numbers and as a month-of-supply, and the recent price increases in some areas, it would some likely more inventory would come on the market.
But what if this is incorrect? Just imagine if inventory falls another 25% by January 2014. That would be the lowest level of inventory in decades. At the current sales rate, the months-of-supply would fall to 3.2 months. I just don't see that happening. So, it seems likely that at least the rate of inventory decline will slow.
Read more at http://www.calculatedriskblog.com/2013/02/housing-what-if-inventory-keeps-falling.html#IZgBkck1dFwUk91Q.99
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