March 2017 Data Roundup: prices moderate, but inventory collapses to 2013 levels

In last
month’s update, we saw an unusually large one-month jump in the
price-per-square-foot metric, with single family homes up 4.5%. This
month, prices by that measure pulled back by 1.4%, indicating that some
of the increase was month-to-month noise. Still, when you combine the
two months, it makes for a robust 3.0% increase in February and March
together. By comparison, last year the single family ppsf rose by 1.7%
over the same period.

Here’s the 3-month average of the single family ppsf in red, which
gives a better idea of the underlying trend.

So despite the monthly noise, the price trend is strong — which is
what you’d expect given that active inventory is really low. Like,
2013-level low:

This, by the way, is not the result of a change in demand, which is at
pretty normal levels…

…but rather by a scarcity of homes for sale:

The low months-of-inventory in 2013 was similar to now, in that it was
driven by a normal-ish level of sales along with very low active
inventory.  And, ‘member what happend then? Prices went bonkers,
is what happened, increasing 18% (Case-Shiller) for the calendar year.

Of course, that was off a significantly lower valuation base, but then
again, the months-of-inventory figure accounts for the level of demand
at whatever the current valuation is, which is probably one reason why
the relationship shown below has worked reasonably well across very
different valuation climates:

As kind of crazy as it seems, if months of inventory stays this low, a
2013-style price surge is in the realm of possibility. I’m looking
forward to seeing what the data tells us in the months ahead.

Further charts below (and if you want a flashback to what a real bubble looks like… enjoy).