Sunday, October 14, 2012

US housing update: shrinking inventories

US residential housing supplies remain at multi-year low levels. The inventories of unsold homes as measured in months (time to clear the inventory) are at the lowest level since 2006.

Source: JPMorgan

To put things in perspective, here is what the situation looks like compared to the previous 3 years.

Source: JPMorgan

This supply of homes is constrained by weak residential construction. The chart below compares residential construction growth in the US to previous recoveries.

Source: Barclays Capital

This is starting to stabilize prices even in areas that have witnessed relentless house price declines, such as Southern California. What's interesting is that we are seeing a shift from the heavily discounted or distressed sales to the more normal "move-up properties".
DQ News: - La Jolla, CA---The median price paid for a Southern California home rose again in September to a more-than-four-year high, the result of affordability-driven demand meeting a modest supply of homes for sale, and a big change in market mix. For the first time in nine months sales declined compared with a year earlier as low-end deals fell and foreclosure resales hit a nearly five-year low, a real estate information service reported.

The median price paid for a home in the six-county Southland climbed to $315,000 last month. That was up 1.9 percent from $309,000 in August and up 12.5 percent from $280,000 in September 2011, according to San Diego-based DataQuick.

Last month’s median price was the highest since the median was $330,000 in August 2008. The Southland median has risen month-to-month for eight consecutive months and has increased year-over-year for the past six months.

The median sale price has risen mainly for two reasons. First, higher demand, triggered largely by ultra-low mortgage rates, has coincided with a dwindling supply of homes for sale. Second, there’s been a big change in the types of homes selling this year. Far fewer are heavily discounted foreclosures, and many more are mid- to high-end move-up properties.
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