Just how low can inventory go?

From the WSJ:

This Problem Is Shutting the Door on Many Would-Be Home Buyers

The U.S. housing market has a supply issue.

Between low interest rates, a steady job market and rising rents, economic fundamentals suggest lots of houses should be selling. Simultaneously, though, tight inventory levels are playing a role in driving prices higher, making the market less appealing for buyers and potentially making it tougher for sales to keep growing at a rapid clip.

As the all-important spring selling season ramps into high gear, Monday’s report on existing-home sales should offer clues of whether higher prices are keeping potential buyers on the sidelines.

Economists polled by The Wall Street Journal estimate February sales of previously owned homes fell 2.6% from a month earlier. On a year-over-year basis, sales are expected to have risen by about 7%. Existing homes account for about 90% of the housing market.

In 2015, existing-home sales had their best year since 2006. But falling inventory could make it difficult for last year’s strength to continue.

For instance, there were about 1.8 million existing homes available for sale at the end of January, according to the National Association of Realtors. That was down 2.2% from a year earlier. It also represented about a four-month level of supply at the current sales pace, near the lowest levels since 2005. A level of six months is considered typical.

Of course, the existing-home market isn’t completely dried up. As the Journal reported earlier this month, housing has become a tale of two markets, as lower-priced homes have been selling rapidly while inventory of more expensive ones is piling up. In other words, the cheaper the price, the smaller the growth in the number of homes available on the market.

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52 Responses to Just how low can inventory go?

  1. grim says:

    From Nasdaq:

    Widening U.S. Home-Price Gap Makes Trading Up Harder

    The widening gap between the middle and upper tiers of home prices is making it harder for people to trade up, tightening inventories and pressuring prices, according to a study set to be released Monday.

    The analysis, by real-estate tracker Trulia, found that fewer midrange or trade-up homes came onto the market over the past four years in metro areas where prices of high-end homes shot up the most.

    “People may be in a good spot to sell their homes, but if they can’t find another home to buy they’re going to be more likely to stay put,” said Ralph McLaughlin, chief economist at Trulia. “It’s really a gridlock, a traffic jam that’s playing out in the housing market.”

    Trulia divides the entire stock of single-family homes and condominiums in a metropolitan area into three tiers: starter, trade-up and premium. Starter homes are defined as those in the bottom third of the distribution, with a median national price of $154,156, while trade-up homes have a median price of $267,845 and premium homes are priced at a median of $542,805. The median prices for each tier can vary widely across metro areas.

    Among the top 100 metro areas across the country, the study found a high correlation between the lower inventory of midrange homes and the price gap between trade-up homes and premium homes.

  2. grim says:

    Existing Home Sales due out this morning, tone is somewhat pessimistic.

  3. We are but hamsters on the treadmill of eternity.

  4. grim (1)-

    I’d submit that this is one of the conditions that verify a descent into Third World status.

    “People may be in a good spot to sell their homes, but if they can’t find another home to buy they’re going to be more likely to stay put,” said Ralph McLaughlin, chief economist at Trulia. “It’s really a gridlock, a traffic jam that’s playing out in the housing market.”

  5. Essex says:

    ….meanwhile foreclosures …. seem to be blossoming

  6. dentss says:

    # 7 ….the truth is out there …..

  7. Essex says:

    “The truth is like poetry– And most people f’ing hate poetry,” – Overheard in a Washington D.C. bar …Michael Lewis, The Big Short

  8. [1] Does this, combined with the oil glut, doom an entire generation of Texans to only be able to bid on “used” houses?

    The widening gap between the middle and upper tiers of home prices is making it harder for people to trade up, tightening inventories and pressuring prices, according to a study set to be released Monday.

  9. The Great Pumpkin says:

    We have an oil glut and they still raise gas prices. Price is based on supply and demand fundamentals……….sure.

  10. [11] old new, pumps, old news.

    The Original NJ Expat says:
    June 21, 2012 at 3:01 pm
    [94] freedy – Take a look at the charts at http://www.oilngold.com

    RBOB gasoline, and heating oil for that matter, decoupled from crude oil prices years ago. IMO, Brent is closer to the true cost of crude and WTI is just a govt propaganda number.

  11. grim says:

    From MarketWatch:

    Existing home sales plunge 7.1% to a 3-month low in February

    Existing-home sales plummeted 7.1% in February, pointing to ongoing rockiness in a housing market struggling to find its footing.

    Sales ran at a seasonally adjusted annual rate of 5.08 million, the National Association of Realtors said Monday, well below the 5.3 million rate forecast by economists surveyed by MarketWatch.

    February’s decline followed a strong two months. Sales surged by the most ever in December, and followed with a sturdy reading in January when most economists had expected some giveback.

    Sales were 2.2% higher in February than a year ago, but the month had an extra day this year, Lawrence Yun, NAR’s chief economist, pointed out. Yun called last month’s decline “meaningful.”

    At the current slow pace of sales, it would take 4.4 months to exhaust the inventory of available homes. That’s up a bit from four months in January, but still well below the six months considered to signal a healthy market.

    Those supply constraints continue to push prices higher. The median price of $210,800 was 4.4% higher compared to a year ago.

    February’s swoon may reflect “resistance” from buyers balking at the limited options and higher prices, Yun said. The share of all-cash and investor sales both picked up in February, while first-timers’ share fell two percentage points to 30%.

    Averaged together, the strong January and weak February make a 5.25 million rate, exactly matching the pace notched in 2015. NAR has called for more home building to help ease the supply constraints.

  12. D-FENS says:

    http://www.supremecourt.gov/opinions/15pdf/14-10078_aplc.pdf

    SUPREME COURT OF THE UNITED STATES
    JAIME CAETANO v. MASSACHUSETTS
    ON PETITION FOR WRIT OF CERTIORARI TO THE SUPREME
    JUDICIAL COURT OF MASSACHUSETTS

    No. 14–10078. Decided March 21, 2016
    PER CURIAM.
    The Court has held that “the Second Amendment extends,
    prima facie, to all instruments that constitute
    bearable arms, even those that were not in existence at
    the time of the founding,” District of Columbia v. Heller,
    554 U. S. 570, 582 (2008), and that this “Second Amendment
    right is fully applicable to the States,” McDonald v.
    Chicago, 561 U. S. 742, 750 (2010). In this case, the Supreme
    Judicial Court of Massachusetts upheld a Massachusetts
    law prohibiting the possession of stun guns after
    examining “whether a stun gun is the type of weapon
    contemplated by Congress in 1789 as being protected by
    the Second Amendment.” 470 Mass. 774, 777, 26 N. E. 3d
    688, 691 (2015).
    The court offered three explanations to support its
    holding that the Second Amendment does not extend to
    stun guns. First, the court explained that stun guns are
    not protected because they “were not in common use at the
    time of the Second Amendment’s enactment.” Id., at 781,
    26 N. E. 3d, at 693. This is inconsistent with Heller’s clear
    statement that the Second Amendment “extends . . . to . . .
    arms . . . that were not in existence at the time of the
    founding.” 554 U. S., at 582.
    The court next asked whether stun guns are “dangerous
    per se at common law and unusual,” 470 Mass., at 781, 26
    N. E. 3d, at 694, in an attempt to apply one “important
    limitation on the right to keep and carry arms,” Heller,
    554 U. S., at 627; see ibid. (referring to “the historical
    tradition of prohibiting the carrying of ‘dangerous and

    2 CAETANO v. MASSACHUSETTS
    Per Curiam
    unusual weapons’”). In so doing, the court concluded that
    stun guns are “unusual” because they are “a thoroughly
    modern invention.” 470 Mass., at 781, 26 N. E. 3d, at
    693–694. By equating “unusual” with “in common use at
    the time of the Second Amendment’s enactment,” the
    court’s second explanation is the same as the first; it is
    inconsistent with Heller for the same reason.
    Finally, the court used “a contemporary lens” and found
    “nothing in the record to suggest that [stun guns] are
    readily adaptable to use in the military.” 470 Mass., at
    781, 26 N. E. 3d, at 694. But Heller rejected the proposition
    “that only those weapons useful in warfare are protected.”
    554 U. S., at 624–625.
    For these three reasons, the explanation the Massachusetts
    court offered for upholding the law contradicts this
    Court’s precedent. Consequently, the petition for a writ of
    certiorari and the motion for leave to proceed in forma
    pauperis are granted. The judgment of the Supreme
    Judicial Court of Massachusetts is vacated, and the case is
    remanded for further proceedings not inconsistent with
    this opinion.
    It is so ordered.

  13. Ben says:

    So when gas was at $3.50, people were screaming conspiracy that it should be at $2. Now it’s at $1.80 and people are screaming conspiracy that it should be at $1.50. I am always amused by the fact that people cheer on higher prices in just about everything other than oil.

  14. grim says:

    people bitch because they like to bitch

  15. walking bye says:

    We have a saying at work “You could hand out $100 bills to the guys and they would still complain”

  16. The Great Pumpkin says:

    It’s no conspiracy, it’s how our market works. I was just pointing out that they don’t even know what to do with all the extra oil, yet the gas industry has figured out a way to raise prices with an enormous oversupply of oil using the same old bs excuses. Oh, we are going to the summer blend so that justifies raising the price 20% in a week. I wouldn’t call this bitching about the price, I would call this bitching about the market.

    Ben says:
    March 21, 2016 at 11:37 am
    So when gas was at $3.50, people were screaming conspiracy that it should be at $2. Now it’s at $1.80 and people are screaming conspiracy that it should be at $1.50. I am always amused by the fact that people cheer on higher prices in just about everything other than oil.

  17. syncmaster says:

    I’m selling and buying at the moment and I hired an inspector I found out about right here for the buy. Peter Bennett of A Full House Inspection.

    He was great. I haven’t moved in to the new home yet so I can’t speak to what he missed (he’s only human so I assume there’s something) but he found quite a bit and perhaps most importantly, I feel like I “know” the property a lot better now than I did before following him around the property for 4-5 hours.

    I feel (there’s that word again) like I got my money’s worth and I will be recommending him to friends and colleagues currently in the market to buy.

    ps. the thermal imaging add-on is awesome, even if it feels a bit expensive

  18. The Great Pumpkin says:

    18- We should have stopped buying when they were charging us almost 5 dollars a gallon. How the hell can you justify that price now? Just like the diamond industry, they control the price. It’s not based on supply and demand.

  19. joyce says:

    Legislator wants more rights than the rest of us, as in he knows what’s best for us. How elitist, and he’s a republican too. Whoda thunk it

  20. Libturd questioning the gender of Hillary's Cankle fluid. says:
  21. The Great Pumpkin says:

    I thought it was a joke at first. Can’t make this stuff up.

    joyce says:
    March 21, 2016 at 1:06 pm
    Lawmaker: Let N.J. legislators, judges carry handguns
    http://www.nj.com/politics/index.ssf/2016/03/lawmaker_let_nj_legislators_judges_carry_handguns.html#incart_river_mobileshort_home

  22. Libturd questioning the gender of Hillary's Cankle fluid. says:

    Sync…

    I know some have had mixed reviews here about him. The first inspector I used at my multi came highly recommended. He sucked ass. We of course didn’t know this until half the crap in the home needed replacing. On our new home, we used Bennett. We also opted for the thermal and had the same feeling about. I wasn’t going to spring for it, but the first inspector we used didn’t tell us that the muti had zero insulation. Of course, the new house ended up being sealed as tight as my first college girlfriend. Glad you had a good experience.

  23. The Great Pumpkin says:

    23- Yes, you are seeing up close and personal, the impact on the economy of not providing raises and jobs capable of sustaining the balance in the economy needed for it to grow. So keep sending jobs overseas, and not giving raises, while at the same time increasing profits to the top. .

    “Peter Tchir, Buchta’s colleague at Brean Capital, also hammered on this idea of new-home sales as reflecting economic trends that have persisted since the crisis — slow wage growth, rampant concern about the future, and an underbuilt low-end housing market have all kept renters renting.

    If we take the view that the jobs being created aren’t that great — which is an argument for another post — then what we’re going to see is a rising class of renters.

    “These low paying jobs are not the type of job that are conducive to buying a home,” Tchir wrote.

    “The first problem is saving for the down payment — a Herculean task in itself. The second problem, and the one that I think is addressed less frequently, is who really wants to commit to an area when the job isn’t that good and may not be stable?””

  24. Fast Eddie says:

    Sales fell across the country, including a 17.1 percent plunge in the U.S. Northeast.

    Any questions?

  25. Essex says:

    27. huge stock market correction put a damper on more than a couple on would be buyers.

  26. 3b says:

    #27 fast: the article says millenials will be just like their parents and buy a house in the suburbs. If so who is going to buy/ rent all the apartments in Hoboken jersey city and Manhattan and Brooklyn? I only know one millenial couple married at this point. Good jobs etc. And they don’t plan on having their first kid until 40! The only people I see buying in my town are older immigrant families. Just saying.

  27. Fast Eddie says:

    [29],

    I don’t know who’s going to buy in the ‘burbs, all I know is that these suckas are going to pay for my house once I’m well north of retirement age. I mean, since I now live in a town with unicorns.

  28. The Great Pumpkin says:

    Next generation of 20 somethings will rent there. Being a millennial, I know a lot of millennials that have bought their first house in the past 2 years.

    I also stated a while back on this blog that all the millennials I knew that lived in Hoboken have jumped ship to the suburbs as soon as they start having kids. I only know of one couple left in Hoboken. The suburbs will not die. It’s the ideal type of living for families. Anyone who thinks otherwise is lying to themselves.

    3b says:
    March 21, 2016 at 2:00 pm
    #27 fast: the article says millenials will be just like their parents and buy a house in the suburbs. If so who is going to buy/ rent all the apartments in Hoboken jersey city and Manhattan and Brooklyn? I only know one millenial couple married at this point. Good jobs etc. And they don’t plan on having their first kid until 40! The only people I see buying in my town are older immigrant families. Just saying.

  29. D-FENS says:

    Arm the government but disarm the people.

    Some days I wonder what country I live in.

    The Great Pumpkin says:

    March 21, 2016 at 1:23 pm
    I thought it was a joke at first. Can’t make this stuff up.

    joyce says:
    March 21, 2016 at 1:06 pm
    Lawmaker: Let N.J. legislators, judges carry handguns
    http://www.nj.com/politics/index.ssf/2016/03/lawmaker_let_nj_legislators_judges_carry_handguns.html#incart_river_mobileshort_home

  30. Now Spanky be reasonable says:

    Re: who will be buying vs. who will be renting

    According to Carnac the Magnificent, there will be fewer buyers as well as fewer renters – demographics is king! With more and more people having at most 2 kids, and most at 1 or none, everything will begin spiraling downward.

  31. Bystander says:

    There is no supply problem. There continues to be a pricing problem. A sh$thole ranch gets listed for 450k and millennials get cold feet and sticker shock. Meanwhile, guy up street with a nice starter colonial who paid $525k in 2005 now wants $725k. He needs it for his down payment to trade up for upscale $950k home. Problem is his home is not worth 725k but it will take him months to come to grips with this. The whole chain is f-ed for generations. It will not be mentioned in any media piece as it is too truthful. I can pull listings and listings of people who are 20% higher than what house eventually sold for. Somehow this is not relevant though.

  32. Fast Eddie says:

    Bystander,

    I looked at one house this morning listed for 925K. They paid 715K in 2012. It’s f.ucking madness and I will forever claim that 99% of the population are bloated, arrogant, f.ucking muppets with no common sense and no financial sense.

  33. walking bye says:

    Fast Eddie/Bystander Another issue is that it will eventually sell for $725 but you and I won’t see it listed for that. It’s almost like an Amazon flash sale when it happens.

    Eddie: easy on the parkway noise rants or Ill put up a sign at the Washington exit – “If you lived here Eddie, you’d be home by now. Now enjoy the crawl up the hill”

  34. Fast Eddie says:

    Ahh yes, the parkway noise… where a house is listed forever and fat Helen wants top dollar!

  35. Wily Millenial says:

    This millennial has jumped off the NJ housing ladder, just in time for another 5% property tax hike for the new lucky winner. Maybe if I’m really lucky the fishing market will tank now.

    I’m really gonna miss NJ life but this feels like a good time to be on the sidelines. Best of luck surviving Christie’s death throes though, I hear every time he sees his shadow it means six more years of transportation crisis.

  36. Wily Millenial says:

    Haha, the fishing market. Housing. Either way.

  37. Essex says:

    I’ve never seen a place quite like New Jersey.
    Now that I have lived here far longer than I ever wanted to.
    I feel we are in the epicenter of some mediocre stew
    where people of all backgrounds seemed destined to screw
    each other into oblivion.

  38. Anon E. Moose says:

    SX [40];

    people of all backgrounds seemed destined to screw
    each other into oblivion.

    Not exactly what you meant, but reminded me of this: https://youtu.be/GfxL_wuYtSg

    All we need is a voluntary…
    free-spirited,
    open-ended program…
    of procreative
    racial deconstruction.
    Everybody just gotta
    keep ******’ everybody…
    till they’re all the same color.

  39. The Great Pumpkin says:

    Demographics are what I have always predicated this 2020’s boom on. All the baby boomers are retiring and finally passing the economic torch to the younger generations who will pick up the spending. We still have at least one boom left, but after the 2020’s, I’m not sure what to think. It’s all about getting that job market and wage inflation going, without that, there will be no boom.

    Now Spanky be reasonable says:
    March 21, 2016 at 3:01 pm
    Re: who will be buying vs. who will be renting

    According to Carnac the Magnificent, there will be fewer buyers as well as fewer renters – demographics is king! With more and more people having at most 2 kids, and most at 1 or none, everything will begin spiraling downward

  40. The Great Pumpkin says:

    Lol…madness

    D-FENS says:
    March 21, 2016 at 2:47 pm
    Arm the government but disarm the people.

    Some days I wonder what country I live in.

  41. Ben says:

    We should have stopped buying when they were charging us almost 5 dollars a gallon. How the hell can you justify that price now? Just like the diamond industry, they control the price. It’s not based on supply and demand.

    Oh? That’s why all these oil companies went bust huh? Tell me, why don’t these wizards just raise it back to $3 a gallon? They seemed to pull it off during the recession. Now that the good times are rollin, shouldn’t be a problem right?

  42. 3b says:

    #31 pumps: if the millennial are moving to the suburbs to have kuds its going to be oh about 22 years or so before their kids move into Hoboken jc Manhattan Brooklyn etc. So again I ask if the millennial all of a sudden are going to flood suburbia who is going to move into all the rentals currently available not to mention all the new building? That’s the problem with these articles written by simpletons for simpletons.

  43. Juice Box says:

    RE#44 – Ben they can’t anymore leverage halas changed for hopefully good. Meanwhile nobody is hanging by the neck as they should.

  44. Splat Mofo says:

    We should enter into armed revolt against the crooks in Trenton.

    Get them before they start getting us.

  45. The Great Pumpkin says:

    They will come from all over the country and also from all over the world. College graduates starting their climb to the top have always been attracted to places like nyc. Middle America will take the hit if the American population drops.

    3b says:
    March 21, 2016 at 9:28 pm
    #31 pumps: if the millennial are moving to the suburbs to have kuds its going to be oh about 22 years or so before their kids move into Hoboken jc Manhattan Brooklyn etc. So again I ask if the millennial all of a sudden are going to flood suburbia who is going to move into all the rentals currently available not to mention all the new building? That’s the problem with these articles written by simpletons for simpletons.

  46. Libturd questioning the gender of Hillary's Cankle fluid. says:

    Does anyone know of a Halal food cart ETF?

  47. Ben says:

    I can just give you my take on all my millennial friends. Anyone ages 26 to 34 right now. Yes, they will all live in Hoboken, Morristown, or Jersey City, until they have kids. Then, they’ll try to move to the suburbs. Problem is, just about everyone single of them is poised to start having kids at the ripe age of 38. They all wait an extra 5 years on getting married and living the lifestyle.

    My friends and I who are 35 who just missed the cut on being classified as a millenial, we are a different breed. We all had our kids at age 31/32, which I considered kinda late at the time. We lived in New Brunswick/Newark while we saved every penny we could and now we all have homes in the suburbs.

    The millenials of this world are too obsessed with living the life in the Hobokens and Morristowns of the world to actually save enough money for a real down payment. Even when they need to escape the suburbs, they’ll be living paycheck to paycheck as their mortgage and continued consumerism drowns their finances. Now, in fairness to them, none of them seem to complain. I just think it becomes a rude awakening when they go to buy a home, actually do, and realize, hey, the $5k buffer we had after purchase just got swallowed up by the broken water heater.

  48. The Great Pumpkin says:

    They have lost their leverage. Now that they have actual competition, they can no longer charge what they like. They were charging as much as the market could bear for a long time. Now, the higher they raise the price, the faster their competition steals their market share.

    Also, no big boys went bankrupt. Maybe Venezuela, but no other major oil producers went bankrupt. The companies that did go bankrupt were playing roulette. They were speculating like they couldn’t lose, and lost.

    Ben says:
    March 21, 2016 at 9:21 pm
    We should have stopped buying when they were charging us almost 5 dollars a gallon. How the hell can you justify that price now? Just like the diamond industry, they control the price. It’s not based on supply and demand.

    Oh? That’s why all these oil companies went bust huh? Tell me, why don’t these wizards just raise it back to $3 a gallon? They seemed to pull it off during the recession. Now that the good times are rollin, shouldn’t be a problem right?

  49. [17] The depression-era version of this was, “You’d cry with a ham under each arm.”

    walking bye says:
    March 21, 2016 at 12:09 pm
    We have a saying at work “You could hand out $100 bills to the guys and they would still complain”

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