August 2020 Housing data -- prices react to inventory shortfall

Submitted by Rich Toscano on September 14, 2020 - 1:36pm
Last month, inventory dropped to the lowest it's been since the bubble. Prices have moved up in response.

Sales continue to be strong... nothing spectacular, but showing no weakness at all:





Meanwhile, available inventory has dropped off a cliff:



The result: super low months of inventory:





As often discussed here, months of inventory is a good predictor of short-term price movements. This period has proven to be no exception, so far:



(For those unfamiliar: the blue line above shows months of inventory, inverted to make the relationship clearer -- lower inventory is represented by the line moving higher. The red line is monthly price changes.)

Here are a few price charts. I should convert these to log scale now that they are so long-term... in any case, the recent price surge is clearly more than the typical summer strength.







Here's summary table:



The market is clearly getting a big boost from low interest rates and the "COVID dynamic" (where people want to buy/upgrade, but nobody wants to sell). It's worth keeping in mind that both these things are (hopefully) temporary. Once life and the economy return to normal, both rates and the housing supply/demand dynamics should go back to where they were before.

One thing that might be permanent is an increased bias towards home ownership if a lot of people start to permanently work from home. That would be good for housing demand, but I have a feeling that the rates+COVID dynamic thing is a much bigger factor. And those will, at some point, be reversed. For now, though, the market is super tight and prices are responding accordingly.

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Submitted by gzz on September 14, 2020 - 3:03pm.

Thanks, great news all around.

I’m not a fan of log scale charts.

You know the market is strong when a house with no back yard and purple shag carpet sells for $1,140 per sq ft. I think I’d demand it be removed prior to closing, probably 50 years of organic particles buried within a bunch of banned chemicals.

https://www.sdlookup.com/Pictures-200028964

Submitted by sdrealtor on September 14, 2020 - 3:13pm.

gzz wrote:
Thanks, great news all around.

I’m not a fan of log scale charts.

You know the market is strong when a house with no back yard and purple shag carpet sells for $1,140 per sq ft. I think I’d demand it be removed prior to closing, probably 50 years of organic particles buried within a bunch of banned chemicals.

https://www.sdlookup.com/Pictures-200028964

Quoting housing prices per square foot particularly near the beach is a fatal analytical flaw. It is not reflective of market strength but merely reflective of a small house on a valuable piece of land. I always say-What you are standing on is far more valuable than what you are standing in.

Submitted by EJ on September 15, 2020 - 12:32pm.

Any chance you have updates to the charts for home valuation and monthly payment indices that go back to the 1970's? Similar to your post in Aug 2019.
thank you!
-EJ

Submitted by Rich Toscano on September 15, 2020 - 1:23pm.

EJ wrote:
Any chance you have updates to the charts for home valuation and monthly payment indices that go back to the 1970's? Similar to your post in Aug 2019.
thank you!
-EJ

Yes I think it would be a good time to update those! I will put it on my to-do list. :-)

Submitted by gzz on September 29, 2020 - 1:30pm.

Rich, I am looking at the months of supply and price change "New Normal" graph. For the spike up to a recent record of about 26%, is that the annualized increase based on the past two months?

It can't be based on the MoM 5% jump since that is 60% annualized, nor the YoY figure of 9%.

Submitted by Rich Toscano on September 29, 2020 - 1:48pm.

gzz wrote:
Rich, I am looking at the months of supply and price change "New Normal" graph. For the spike up to a recent record of about 26%, is that the annualized increase based on the past two months?

It can't be based on the MoM 5% jump since that is 60% annualized, nor the YoY figure of 9%.

It is the monthly change, annualized, of the "price".

The "price" is:
- Case-Shiller for all but the last 2 months
- last 2 months: 3 month avg of single-family price/sq ft (so chosen because Case Shiller uses a 3 month average as well)

Submitted by gzz on September 30, 2020 - 11:30am.

So annualized monthly change of the three month rolling average. Impressive Excel jujitsu!

Submitted by Escoguy on October 7, 2020 - 9:03pm.

Looking forward to the pending refresh.

Our escrow closed on the 30th and was told the recorders office/escrow was very busy.

It's anecdotal but would expect another drop in inventory.

Prices continue to climb in 92027/92127/92078.

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