New-Home Inventory Shrinks to Record Lows

DAILY REAL ESTATE NEWS | MONDAY, FEBRUARY 27, 2012
Inventory of new homes on the market shrank to its lowest point on record in January, marking a 5.6-month supply at the current sales pace, the Commerce Department reports.

With fewer homes available, the price of new homes increased slightly last month. The median price for a new home ticked up slightly at 0.3 percent to $217,100, which is the highest level since October.

However, January sales of single-family homes mostly stayed falt in January, falling less than 1 percent last month compared to the previous month. New-home sales reached a seasonally adjusted annual pace of 321,000 units.

New-home sales were up 3.5 percent compared to the same time last year, the Commerce Department reported.

"This is indicative of the incremental, steady progress that the market is making toward recovery in conjunction with modest economic and job growth,” said David Crowe, the National Association of Home Builders’ chief economist. “Increasingly, potential buyers are feeling better about their financial situation and their ability to buy a home, but the challenges posed by tight credit conditions and appraisal issues continue to slow that process."

Regionally, the Midwest saw the biggest decline in new home sales in January, a 24.5 percent drop in sales followed by a 10.6 percent drop in sales in the West. On the other hand, the Northeast posted an 11.1 percent gain in new home sales in January, and the South saw a 9.3 percent increase.

Source: National Association of Home Builders

Interest Rates Up, Inventory Down, Rental Vacancy at Ten Year Low

This past week saw reports that for the first time in four months mortgage interest rates are headed up – slightly. Some say this is due to signs that housing sales are percolating upwards. Regardless, a rate increase is not a bad thing. It will likely cause some of those sitting on the fence to get into the market.
What should be of more concern is shrinking inventories. In several markets we have anecdotal evidence from leading brokerage firms that low inventories are starting to impact sales. In one market, Denver, it is reported that as of last week nearly 50 percent of all the listed homes on the MLS are under contract. From every market we hear that most of the action is still in the entry level segment of the market.
It sets up an interesting challenge. With home valuations still heading down what will happen when there are two to three buyers for each of these homes yet they cannot enter into real price competition due to the inability to get the home appraised. This situation would seem to overly favor the all cash buyer, often an investor, who doesn’t worry much about valuations.
Reports also indicated that rental vacancy rates are at a ten year low of 5.2 percent. As the homeownership rate declines more and more families are heading the rental route and right into strongly increasing rental rates. Federal agencies and some private financial institutions are poised to drop more inventory of distressed property into the market and execute programs to turn some of these into rentals. It would be a good time for them to do so.
By Steve Murray

Up 15.2% – January 2012 Longmont Area Sales Stats

There are so many positive things in the January 2012 Longmont Residential Sales Report that I hardly know where to begin. A 15.2% increase over January 2011 is a really good start to the year. Additional gains in both Median and Average Sales Price are nice, but I don’t put too much stock in either of these numbers, especially not with such a small sample. The low number of Active Listings is a really nice way to enter the rush-to-market that happens in March.

There are several other equally nice items sprinkled through out this report. Other numbers aren’t as positive, but there is one thing that I just can’t keep my eyes off. Look at the pretty little trough etched into the bars that make up January sales over the past 6 years. They are all grouped together, decline slightly for four years, then crawl upward ever so slowly. That graphic encapsulates how I see this market over the next several years…having dropped over years and slowly crawl back to life. If February posts number above 47 it will have a similar look to it and I might just become giddy.

Look for the Denver Metro Area Stats and our full Boulder County Residential Stats piece to be posted, along with other locally relevant resources, here by about February 17th.

Weekly Info 02/03/2012

In a double surprise, the job market may at last have begun to revive, but the double-the-forecast, 243,000-job surge in January has done little harm to mortgages. We are still near 4.00%; 10-year T-notes up from 1.82%, but holding nicely at 1.95%. Housing hangs over everything in the US economy, all measures of prices in continuing decline through December. But, to his great credit, Mr. Obama devoted a speech this week to housing, including new proposals. "This housing crisis struck right at the heart of what it means to be middle class in America: our homes." Right! The proposals will be without effect, but that's not Mr. Obama's fault. That two years have passed without proposals or priority or even mention, that is his fault, but give him full praise for saying out loud: "Hey, there's an elephant in this living room!" Why there are no effective proposals, and why it's beyond even the President's power to put them forward is a tale of human nature. We know perfectly well what to do, but several things in ourselves and our political process prevent action.