Summary
1. Does the data from several sources indicate that housing inventory is hitting bottom. 2. What is driving the current market conditions 3. What will drive the market to react from a negative or positive nature
Analysis
Residential real estate inventory could be nearing a low point as the number of homes listed for sale in a significant number of the larger metropolitan areas went down 3.9% from April to May. This data came from ZipRealty. From May of 2008, a year ago to May of 2009 the change is down 24%. Is this an indication that we have hit bottom or are nearing the bottom of this cycle?
The National Association of Realtors data indicates that the number of homes up for sale in April of 2009 was about 4 million. That represents about a reduction of 11% from April a year ago. These numbers may be suspect or inaccurate, to a small or significant effect because homes in foreclosure and getting ready for sale are not included.
The reason for the optimism of reaching the bottom of the market is based on the significant drop in listings coupled with the severed reduction of new residential construction that has also dropped. A recent Wall Street Journal piece as well as information from the National Association of Realtors indicates that the drop in the number of resale’s and the fact that new home construction is flat "indicate that home prices in many parts of the country could be nearing a bottom."
Other indicators that we are hitting bottom is additional data showing the national house price index in April was even with March, but still down 13% from April a year ago. Fear of the unknown and the current economic climate still drives the housing market. If you’re a new or first time home buyer the housing value has never been better.
Considering that there is still the first time home buyer’s credit is still in place there is a market waiting to be tapped. However, increasing mortgage rates that have been seen in the last few weeks has not driven those on the fence to make a move prior to even greater rate increases. As we can see, fear is a powerful motivator. As in all things, time, interest rates, unemployment concerns, housing value and yes “Fear” will continue to mark the landscape.
