WSJ Article – Housing Inventory Surges in March

[CAwireman]

http://articles.news.aol.com/business/_a/housing-inventory-surges-in-march/20070405075209990003?cid=1712

A sharp increase in homes offered for sale last month suggests that home shoppers will find plenty of choices this spring. The number of homes listed for sale in 18 major U.S. metropolitan areas at the end of March increased 6.5% from a month earlier, according to data compiled by ZipRealty Inc., a national real-estate brokerage firm in Emeryville, Calif. The data cover listings of single-family homes, condominiums and town houses on local multiple-listing services.

Over the past 22 years, home inventories nationwide have increased an average of 1.7% in March from February, according to Credit Suisse Group. Supplies typically rise modestly in March as sellers pursue the many families with children who seek new homes in the spring, so they can move during summer vacations.

The big rise in the latest month may reflect seller’s expectations that it will take much longer to find buyers than it did during the housing boom of the first half of this decade, said Patrick Lashinsky, president of ZipRealty. Rather than waiting for April or May, he said, many people planning to move this summer put their homes up for sale in March. He added that many sellers are being cautious, waiting to sell their old homes before committing to buy new ones.

ZipRealty recorded the biggest increases in the metro areas of Los Angeles (12.8%), San Francisco (12.2%) and Washington, D.C. (9.4%). Miami, where a glut of unsold condos has been weighing on the market, showed a modest rise of 1.8% in the supply of all types of homes in March from a month before. But the Miami inventory was up 61% from a year earlier. For all 18 metro areas, the inventory at the end of March was up 35% from a year earlier.

Large inventories have caused prices to level off or fall modestly in much of the country over the past year or so. The recent surge in defaults on subprime mortgages — loans to people with blemished credit records — has prompted lenders to tighten credit standards. That tightening is expected to put downward pressure on home prices by removing many potential buyers from the market.

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Any bets on whether we’ll have a spring rally? This is a good contrast to the Healthy Employment articles that offset the consumer confidence and RE news today.

[sdrealtor]

Maybe other places but inventory has been pretty flat since New Years.

[Bugs]

What should be troubling is the ratio of listing inventory to sales transactions. The number of residential sales listed in the MLS 2006 (29,000+) demonstrated the lowest volume since 1997, despite the fact that we’ve added just over 10% more homes and condos to the inventory since then.

If 2006 was bad, 2007 is shaping up to be even worse. The first quarter of 2006 saw 6,700+ sales in the MLS, which at an average of 2,235/month is about what you would expect for a first quarter in a 29,000 sale year.

So far, the first quarter of 2007 has resulted in <5,800 sales, which demonstrates a drop of ~14.5% when compared to 2006. If this trend holds up the volumes for 2007 could slide in there between those for 1997 and 1996.

Meanwhile, the number of must-sell transactions is ratcheting up to comprise an ever growing percentage of the transactions.

[JJGittes]

Location location. Ditto to sdrealtor, the pickings are mighty slim in 92009, 92011 and 92024, least in the $700-850k range right now. Not exactly condusive to the bottom falling out in the near future.

[sdrealtor]

I agree with Bugs that the drop in sales is definitely troubling and distress sales are on the rise. There is no question about it. Prices will continue to fall, we just dont know how much. For over a year I’ve forecasted a 30% nominal drop peak to trough while others are expecting/hoping for much more. Given what I see happening with the market a 30% nominal drop is not in the bag anymore IMHO.

I believe the biggest and fastest nominal drop we will see occur in a 12 month period already have occurred in 2006. I expect to see a prolonged period of slightly declining to flat prices where a large portion of the decline happens in real rather than nominal terms. Probably not what most bears want to hear but likely in my book. If you look at Rich’s latest graph on the home page you see that is what happened last time around. I could be wrong and if so, I can deal with that. My advice to bears would be to be prepared for that scenario also.

[CAwireman]

I’m definitely not an expert in the RE field.

I’m pretty surprised at the lack of evidence of more of a home value downturn in SD.

Q2 will be pretty interesting. If sales figures don’t suggest SD to be falling off a cliff or at least sliding down a blue-square ski run, my spouse will be all over me to buy, buy, buy!

[temeculaguy]

Bears, don’t throw in the towel just yet. The next year or two will tell the story, not the next month or two. The subprime problems will take even longer to trickle upward to the markets that most of us want to live in. Just remind yourself of the basics, all time high prices, no increase in high earning population (44k moved out of county replaced by immigrants and babies, 50% of the babies to non-citizens), normal increase in wages, declining wages and jobs for those in R/E related fields, increase in units, tighter lending standards, less “affordability lending products”, hell the only thing keeping this ship afloat is the short term memory of the money to be made and low interest rates. Give it time, this summer will be a doozy as the masses realize it and start heading for the exits, then in the fall the first batch of the repos will start showing up.

[Anonymous]

We haven’t seen nothin yet, the biggest drop will come in the next two years, after the credit meltdown and ARM resets take full effect. I think SDR is pulling his predictions out of his rear because all the signs point to a minimal demand for RE in the next few years. The upcoming wave of foreclurue activity is going to put tremendous downward pressure on prices and the drop in demand may be more dramatic than ever seen.

[hipmatt]

I fully agree that this is just the beginning, with subprime disappearing, and the fact that housing supply vs. population is WAY higher than ever before, we have just crested the top and it takes time to build up speed.

I have to disagree with SDR comments about not even seeing a 30% drop. This was the biggest boom ever, why won't it be the biggest bust ever? Just because a few of his favorite zip codes have modest listings, doesn't mean anything to stop the broader market.

ZipRealty recorded the biggest increases in the metro areas of Los Angeles (12.8%), San Francisco (12.2%) and Washington, D.C

When housing gets cheaper in LA, it gets cheaper in SD too.  Its not that different. 

[sdrealtor]

Deadzone and Hipmatt,
We’ll just have to see. I’m not convinced either way at this point and nothing would surprise. In the same vein, I’m well prepared for what ever happens. Are you?

[SD Realtor]

I kind of agree with sdrealtor as well. I do not disagree that there is alot of potential for heavier drops. However guys read into the arguments you are relying on. I read alot of this or that HAS to happen. It seems like there is alot of hope in these statements. That this market HAS to crach because all of these foreclosures HAVE to happen. Or the economy HAS to collapse because real estate is so intertwined in it. The S&P HAS to crash in 07. What happened to all of the posts about the 25k inventory levels we were supposed to see?

This is what is most troubling to me when I read these posts is that they take facts and then extrapolate them to a disaster that HAS to happen. That is unavoidable. That lenders and big money and maybe even the government will not do whatever they can to avoid it.

Hey I am a bitter renter, don’t get me wrong. Nor do I depend on real estate for my livelihood as engineering is my primary means for survival. I WANT prices to go down as I am damn tired of renting and like other posters have a wife who has run out of time and patience. I THINK that we will see the down cycle continue over a long measured cycle that will take a few years. I also believe and have said over and over again, that this decline will produce more marked variations in neighborhoods. Just like the runup was pumped by cheap money, there are neighborhoods where a high number of homeowners are not distressed and will simply ride it out. Then there are other neighborhoods that will be hobbled drastically by high foreclosures. Yes the buying pool will be reduced but lemme tell ya guys, 100% financing is still out there and people ARE getting loans.

So like all the posts, mine is just speculation, if I am wrong and it does dump, then I will be happy because I will be able to buy sooner. I have been busting ass, working 2 jobs and building a cash pile just for that reason. So yeah, the indicators are all looking good for a crash, and the sub prime and alt-A lenders are feeling heat. Yet the stock markets, which always lead the way regarding the economy, which I trust more then anyone on this site, and the inventory levels for San Diego, as well as the availability and pricing of homes in neighborhoods where I want to live, (as opposed to those in Escondido or Lemon Grove) tell me a different story.

I guess we will see.

[sdrealtor]

Adam,
Sorry for the delay but I’ve wanted to post this and have been too busy. The more I read your posts, the more impressed I am by you personally. While we may disagree on some aspects of the RE business I respect your attitude and focus toward getting what you want out of life. Success is not an accident. Sure it takes some luck but you cant hit it out of the park if you are not swinging.

Many but not all on this board at all income levels are hoping to “crash” into the lifestyle they desire but have very weak “Plan B’s” (I’ll just rent forever or I’m leaving SD). There is so much opportunity in this world and too many people throw their hands up in defeat.

It’s a shame you weren’t around when Docteur, my personal favorite poster was here. His attitude toward life was spectacular. His farewell post was a great delineator between those that will go get what they want and those that can only hope for it. I am reposting it after this message think you will enjoy it. Put aside the personal conflict with PS in the post. I know this will no doubt put her in a tizzy but this isnt about her. Its about taking responsibility for your own success and making it happen.

SDR

P.S. You could be my neighbor anytime.

[sdrealtor]

Sorry but after reading it, I justed didnt feel like bringing up past hard feelings again. I reoved the text and if you really want to see it you can find it at this link below.

http://piggington.com/addicted?page=1

[SD Realtor]

Thanks for the comps sdr. You and I have butted heads on issues and we have differing opinions on things. I know we have provided some fun in the past, people probably like our disagreements more then our agreements.

However, when it comes to simply looking at the market situation odjectively, it is quite evident that we both see the facts and interpret them in the same light even though our business models are on opposite sides of the spectrum. We don’t claim to be any more correct then any other poster, we just pretty much print what we see. Hopefully people do not see us homering for the real estate machine even though we are part of that machine.

I did read the repost and I thought it to be insightful. I think Doc had left right about when I joined on.

SD Realtor

[Nancy_s soothsayer]

People in San Diego seem to suffer from ADD. They get so distracted so easily. Focus should be on the Oct. 2007 bulk of subprime implosion. We are only in April 2007, and we should be patient for a few months more. Keep that phony celebration of a soft landing crap out of this blog, please. In 2008, the crashing of prices should commence real hard, that it would be very obvious even to a first grader with real ADD. By October 2009, we can all go and buy cheap houses again in San Diego – that is how optimistic we housing bulls are. Cheap houses for everyone again in 2009. Yeaaay – clap, clap.

[Author]

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