Rising Inventory Could Stall Home Price Rally

Submitted by Rich Toscano on July 1, 2010 - 10:40pm
The economics blog Calculated Risk put up a very interesting graph last week that showed the relationship between housing inventory and home prices at a national level.  It was so interesting, in fact, that I decided to "borrow" the concept and recreate the graph for San Diego County.

It is below, but it requires some explanation...



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Submitted by SD Realtor on July 2, 2010 - 9:00am.

I think we could be coming to an inflection point. One of the problems however is that SD County is way to diverse. I see areas of steady inventory growth and very poor active pending ratios. I also see areas of solid activity as well and some surprising strength in the price ranges we would not expect to see.

So yes for the past several weeks we have seen growth for a variety of reasons, yes the homebuyers credit contraction hurt, but IMO the unrealistic pricing due to a 2009 rally has added to a stagnanation of alot of supply. Lack of buyers is not as much of a problem. Buyers are more insightful now and wary of further downturn so that reluctance to buy into the rally has helped to blunt it. I think by the end of the summer we will have a clear direction. Things move slowly but personally our group is exercising alot more caution at the sales we go to because a trap may be coming.

Submitted by 34f3f3f on July 4, 2010 - 9:38am.

Thanks Rich for pointing out that price declines are inverted on the graph. That foxed me for a while, as you'd instinctively expect declines to be in the lower half.

Where do your think this growing inventory is mostly coming from; foreclosures, or organic sales? We've read so much about this relationship in the past, and in the same breath as the shadow inventory, only to be informed later that lenders (may) have exercised a level of control over it.

Submitted by Rich Toscano on July 4, 2010 - 9:53am.

"Where do your think this growing inventory is mostly coming from; foreclosures, or organic sales?"

I don't know the answer to that... I suspect both as I've heard that a little more foreclosure inventory has been hitting the market, but I've also heard that a lot more homes are being listed because the price increase has enticed sellers back into the market. I don't know the ratio though... do any of the realtors on the board have a feel for this?

Submitted by pemeliza on July 4, 2010 - 12:21pm.

I am not a realtor but I do follow 92103 closely. Most of the inventory increase in that area is from organic sellers.

Submitted by SD Realtor on July 4, 2010 - 8:52pm.

In a nutshell both. We were going to look into a sale for a clairemont home in 92111. We backed off because in a quarter mile radius there were 4 investor owned places that all had price drops already. In other areas it is not like that. In 92103 for instance the number of at least detached homes that go at auction is miniscule. In 91913 it is not like that. Thus the variance is wild from area to area.

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