This year’s hot price increases could be more important than rising rents, credit availability or even underwater homeowners in freeing up the inventories that stifled hundreds of housing markets last season and kept sales from reaching their potential, according to a new study by two Federal Reserve economists.
Price increases and job growth are more important than buyers’ access to credit, freedom from negative equity, owners’ decisions to wait to achieve greater gains and the loss of large numbers of owner-occupied homes to rentals in a market when it comes to building inventories.
Last season opened with inventories at near-record lows in February, down by 15.97 percent nationally compared to a year ago and is less than half its peak of 3.1 million units in September 2007. Inventories increased in 100 out of Realtor.com’s 146 markets and even markets, spurring price increases and seasonal increases in homes for sale.
“Current inventories of homes for sale are low given more than a year of house price appreciation,” concluded the study Fed by economists William Hedberg and John Krainer released recently. “County-level data suggest that many homeowners are waiting for prices to rise further in their markets. Markets that have seen the strongest house price appreciation and job growth are the ones where for-sale inventories have declined the most.”
The economists analyzed a number of widely discussed causes of the inventory decline beginning with the transformation of about 3.5 million formerly owner occupied homes into rentals since 2007. “It is impossible to say though whether declining sales are pushing down homeownership rates or falling homeownership is pushing down sales, or both are interacting with each other in a complicated feedback process,” they concluded
Nor could they find strong evidence that homeowners are keeping their homes off the market in hopes prides will continue to rise. “On balance, counties that experienced relatively large increases in house prices over the past year also experienced relatively large declines in inventories available for sale,” they said.