Came across these very interesting graphs from the excellent Calculated Risk Blog today:
This first graph shows Existing Home Sales from 1994 and forecasted out to Jan 2011. It’s interesting how this corresponds with our other blog post from this morning discussing the woes of the housing market. The artificial boost the homeowner tax credit gave first time homebuyers was quite significant, judging by that great drop in prices.
This graph above makes it look like inventory sure is going nowhere quickly. Despite historically low interest rates and many deals around on houses, people just simply are not buying properties. This means that we can expect some significant foreclosure activity and short sale activity for the next period of time (in our opinion: several more years). This underscores the importance to everyone involved in real estate the emergence of the short sale transaction from a niche category to a truly mainstream way of clearing out bad inventory on the bank’s books. It’s a tough nut to chew, but one banks are really going to have little other options.
Another interesting trend here is that year-over-year inventory, despite being negative for over a year, is now back in neutral territory. For a true housing recovery, that inventory change needs to be dropping, not increasing, as it is doing here.
The last chart we have here is months of supply. This is a pretty astonishing graph, in that we are now at over a full year of supply! Even in the best of economic circumstances, clearing that kind of inventory takes a significant amount of time.
What does all this mean? It means buckle your seat belts, folks, because it’s gonna be a while before the housing market really sees a turnaround.
