When we published “Will Sellers Step up the Plate in 2016? “two weeks ago December market report weren’t in yet and it was clearly too early to blow the bugle over the inventory picture for the coming season
The reports are now in and hands are reaching for the nearest brass instruments. Too many signals from too many sources are not looking good, especially for the mid to lower tier entry-level homes that Millennials need to escape the Rent Trap.
“Insufficient supply levels” is how NAR’s Lawrence Yun characterized the inventory picture when he released December existing home sales. The headlines last week. His careful choice of words masked the very serious possibility that inventories at the outset this year could be worse than last or even 20013 when shortages erupted in bubbles across California.
Here’s a quick review of the latest:
NAR Traffic Report
Seller traffic was broadly “weak” across most states in December, as measured by Sentrilock, the leading lock box system. Seller traffic was reported to be “strong” only in North Dakota where much residential construction took place as builders anticipated strong housing demand in the wake of the boom in oil production. There was also “very strong” selling activity in Puerto Rico, where significant out-migration is taking place, given the economy’s financial woes.
NAR Existing Home Sales and Realtor Confidence Index
Total housing inventory at the end of December dropped 12.3 percent to 1.79 million existing homes available for sale, and is now 3.8 percent lower than a year ago (1.86 million). Unsold inventory is at a 3.9-month supply at the current sales pace, down from 5.1 months in November and the lowest since January 2005 (3.6 months).
Nationally, properties sold in December 2015 were typically on the market 58 days compared to 66 days one year ago. Fewer days on the market are an indication that inventory remains tight. Short sales were on the market for the longest time at 86 days, while foreclosed properties typically stayed on the market for 68 days. Non-distressed properties were typically on the market for 57 days. Nationally, approximately 32 percent of properties were on the market for less than a month when sold.
Active inventories on Zillow in December fell by 7.7 percent from December 2014. Listings on the site dropped from 1,6012,255 to 1,477,330 (SAAR).
December median age of inventory was 94 days, which is up 12 percent from November but still down 6 percent year-over-year.
Last month (November) prices spiked due to a dearth of properties on the market. In December, there was a three-month supply of homes for sale, a steep slide from the 4.1 months reported in November. The lack of inventory supported a fast market, where the typical home sold in 41 days, a week faster than a year ago. December listings fell 10.3 percent from November and 5.4 from December 2014.
The inventory of homes for sale remains very tight in many metros across the country, at a level that is 14.2% lower than December 2014. At the rate of home sales in December, the national Months’ Supply of Inventory was 4.9, down from 5.7 one year ago. A 6.0 months’ supply indicates a market balanced equally between buyers and sellers. The number of homes for sale in December was 12.5% less than in November and 14.2% less than in December last year. The average loss of inventory on a year-over-year basis for 2015 was 12.2%. The highest month supply was seen in Augusta, ME at 14.1 months. Three metros had a supply less than 2 months, San Francisco with 1.1, Denver, CO 1.8 and Seattle at 1.9 months.