October Housing Data

Resale prices, as measured by the size-adjusted median price, were down again last month:

Unsurprisingly, single family homes were weaker than condos (as was the case with volume, as we will see below). This is because single family units are playing "catch-up" to the downside now that the credit crunch has started to affect higher-end borrowers.

Here’s a look at that series since its September 2005 peak:

Despite the bout of strength earlier in the year (which was more a statistical artifact than real price increases, as I’ve discussed ad infinitum), the rate of decline in the size-adjusted median has been significantly faster between Oct. 2006 and Oct. 2007 (-7.5%) than it was between Oct. 2005 and Oct. 2006 (-4.8%).

Let’s have a look at the year-over-year change in the plain vanilla median, since this seems to be the most widely cited price indicator in the media.

Much of the artificial strength in the median prices has been abruptly removed over the last couple months, but the disparity with the size-adjusted median and the Case-Shiller index suggests that this metric is still overstating home prices. The year-over-year median price comparisons are going to get pretty progressively more brutal throughout the first half of 2008, as the comparisons will take place with early 2007’s artificially high prices. What will be the reaction on the part of all those people who’ve been mistakenly clinging to the relatively stable median as a sign that things aren’t so bad?

Here is a look at the single family median, size-adjusted median, and Case-Shiller HPI for comparison. As previously discussed, the spreading tightening in the mortgage market has caused the median-based indicators to start to fall into line rather abruptly.

OK, onto supply and demand. The fires may have caused a slowdown in purchase activities in October, but since this data is all based on closed sales that wouldn’t show up until the November numbers. Perhaps some closings were delayed but my guess is that this didn’t have a big effect on total closings. Maybe some realtors on the site can weigh in here, but I suspect that the October volume decline has more to do with continued credit tightening and increasing bearish sentiment than it does with the fires.

Whatever the cause, sales were down in October, with single family homes showing steeper year-over-year declines than condos due to the aforementioned catch-up.

Here’s a look at how the total sales volume for 2007 stacks up against 2006.

Inventory came down a bit last month, but is slightly positive compared to last October, with single family homes once again bearing the brunt of the increase.

2007 continues to look similar to 2006, only slightly weaker in the last couple of months.

Months of inventory increased yet again due to the plummeting sales volume.

The number of total months of inventory was 62% higher than in October 2006!

That’s before even considering that the higher proportion of "must-sell" inventory:

In short, prices have continued their relatively slow slide, but the supply vs. demand situation has quickly become absolutely dismal. This suggests that the price declines are likely to pick up the pace in the months ahead.