July 2014 Housing Data Rodeo

Submitted by Rich Toscano on August 10, 2014 - 1:35pm
I think we can agree that the typical Econo-Almanac reader is both unusually attractive, and a busy go-getter with places to be and things to do.  Things besides reading a real estate blog.  It is for you Coffee Achievers1 that I present this convenient new2 table summarizing the month's statistics:

1 Youths, please see this important educational video.
2 It is unclear to me why I didn't start doing this like 8 years ago or something.

Moving on to the charts... the single family median price/sqft  backed off slightly, but this was expected after last month's surge.  In fact, I expected it to back off a bit more than it did.  Due to the uptrend in months of inventory (discussed below), I've been expecting price appreciation to slow -- but even after last month's decline, the price/sqft is still up 3.5% from May.  As always, there can be noise and volatility in this data, and the median price per square foot is definitely an imperfect approximation of actual price changes (though it's a pretty decent one).  But with that said, prices appear to have risen a good amount over the past couple of months.

Closed sales were slightly down for the month, while pendings were about flat:

Inventory continued its pattern of recent months: total inventory rose, but underneath the surface, active inventory was rising more strongly as contingent inventory declined:

We haven't seen this much active inventory since January 2012:

As a result, months of inventory rose, and months of active inventory rose more than that.  The latter is well above mid-year levels of either 2012 or 2013:

However, both measures of inventory are on the historically low side (especially months of overall inventory):

The trend of rising months of inventory -- should it continue -- suggests a slowing of price appreciation in the near future.  Then again, this was already the case, and prices have been pretty strong recently.  Perhaps the decline in mortgage rates gave prices a boost.  But if that's to be an enduring factor, then it should bring more demand to the market at current prices and bring down the months of inventory figure. 

This is why I like this measurement; it encapsulates everything that affects supply and demand (including price, the economy, rates, etc.) into one figure.  As the above graphs show, this figure does have a pretty good correlation with price changes, though that relationship is far from perfect.  The situation right now can be summed up thusly:
  • The market is somewhat undersupplied compared to demand, which implies further price increases in the immediate future.
  • But, supply (vs demand) has been increasing fairly rapidly, which implies that these price increases should be modest.
  • And, if that trend of increasing supply continues at this pace, prices could soon flatten or begin to decline.

We will see what future months bring...

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Submitted by CA renter on August 11, 2014 - 5:36pm.

Love your writing style, Rich. :)

Thank you for these graphs. Looks like we're heading in the right direction, at least it's getting to be slightly more normal with respect to inventory and price changes.

Submitted by moneymaker on August 11, 2014 - 9:56pm.

I predict 5 months of inventory by years end! Then we'll see what represents a normal price in the market. Sales seems to be leading inventory inversely. Meaning even if inventory were stagnant, if sales drops by half it doubles the months of inventory.

Submitted by spdrun on August 12, 2014 - 10:24am.

Here's to 7 by next summer... *clink*

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